day, mario draghi's big what might the ecb resident announce. lucky number seven for apple, the iphone reviving slower sales, but where has the innovation gone? and china's cushioned by a weaken yen, surging to a seven-month high. >> welcome to countdown. manus: great to have you on the program. nejra: great to be here.
let us talk about the big themes. one of them is do not mess with my currency. the chinese of course, this is what we have for you. now are-yuan.in breach of this level. and the pc of the said this is it. back off on the currency. they ratchet up the price of borrowing, up by 3.8%. since the highest february. these moments of breach and dollar-yuan invoke the invective from the pcbo, ratcheting up. that is putting the cap. that is the message from the g-20.the devaluation , or let us say the depreciation of the currency. exports up for the third straight month, imports are searching. yuan, do not mess for my currency. nejra: is that a look at the risk radar. see what we are watching this morning. starting of course with global stocks i have the msc. i all country pretty much
unchanged, really ahead of the ecb today. and you have the bank of japan coming up later this month and the fed decision. it got quiet and equity markets. volatility is down. we are seeing those stocks pretty much unchanged. asian stocks by the way have been retreating from a 13-month high. i also have a new zealand dollar. it is rallying against the greenback, the best-performing t10 currency against the greenback today in fact. we are seeing a weaker yuan, south korean yuan down against the dollar. and finally, just wanted to show a bit of crude, up 1.6%. 46.23 on wti. manus: iran saying almost too early for a freeze. they want to continue to produce. you have u.s. data dropping last week. that is the push and pull russia, and the reality of the inventory. let us get up to rosalind chin.
she has the bloomberg first word news. rosalind: thanks, manuys. apple has announced updates to the iphone and watch including camera upgrades,, a faster processor, longer battery life, and a new design. it also ditched the headphone socket to make room for other features. ceo tim cook called it the best iphone ever created, but others were not so enthused with shares rising less than 1%. imports rose last month for the first time since 2014. and the countries exporters enjoyed a cushion. overseas shipments fell measured in u.s. dollars, but rose almost 6% in yen terms. japan's economy showing signs of life, growing by an annualized 0.7% in the second quarter, more than the government' admission readings of 0.2%. this gives the boj summative think about ahead have the closely watched meeting later this month. at that meeting, policymakers
will release their view of central bank strategy and decide whether to increase the newness. book sayslatest beige businesses are increasingly presidential election a of concern in the appraisal of the u.s. economy, july,m two mentions in none from 200 pre-election is not a strong turnaround, when president obama took on mitt romney. the u.k. housing market gain momentum in august, after the shock to confidence caused by the brexit vote. that is according to the royal institution of purveyors. the house price gauge rose from 12 to a three-year low of five in july, as more real estate agents remain a negative in london, indicating home values are falling up right. liberty media has agreed to take control of formula one
motor racing. it will initially pay $4.4 billion for 18.7% stake in f1 parent company, taking full ownership later. will remainfounder ceo. global news 24 hours a day powered by more than 2600 journalists and analysts and more than 120 countries. you can find more stories on the bloomberg at top . i am rosalind chin. this is bloomberg. thanks so much. the cost of borrowing in hong kong has surged with seven-month high, climbed to 5.4%. that is amid speculation that china's central bank is intervening to discourage bearish bets on the currency. more, robin joins us from hong kong. robin, how strong a signal is this from the pcob>? ? manus would rather eloquently a few months ago, do not mess with my currency seems
to be the message from the pcob. we are not hitting the panic button and expecting they will send a strong signal of depreciation or appreciation. i think what the central bank is trying to do is try to limit the currency, afraid of one way that appreciation or depreciation, just try to keep steady before the scr, does not want to exacerbate market moves at the moment. it is sending a very strong speak, to the market as it has done over the past couple of months or so. yes, butncy can move, if the moves become extreme we will step in and we won't hurt you. manus: i like it. do not mess with my currency. invokes that song in my head. i have been singing it all morning. this year, helping the trading numbers, hasn't it? is china beginning to get uncomfortable with it? or is china really appeasing his
g-20, the newfound global status? moment, itat the seems like, i mean we are all aware that china leading up to important political events tends to avoid large-scale depreciation. but one must from number that the currency has dropped about 0.5% since the start of august. so the depreciation pressures are increasing with the fed expect to raise borrowing costs by the end of this year probably. said, thes you smaller than expected decline in imports has given it some room to play with the currency, tweak policy to what it really wants to happen. said, overall the estimate is for the currency to decline, about 1.3% by the end of the year. china does the to prove that it has gdp growth target of 6.5%, if it wants to achieve that, and
have to have some sort of monetary easing in place. it is extending control over borrowing costs, etc. so at least some sort of weakening in the currency to have that. so yes, at least the medium-term expectation is for depreciation. but like we have seen, if it moves too much, then pcob will step in. nejra: robin ganguly, thank you so much. manus: it is decision day for mario draghi. his governing council. few forecast a change interest rates, though just on those surveyed by bloomberg, they see some form of action are most likely to be prolonged, pass the end of the current end date of march 17. bloomberg's caroline hyde joins us live from the ecb in frankfurt. caroline, what action if any of the market expecting? caroline: well, as were just
saying, about half are anticipating that we could see quantitative easing as soon as today. but the data is starting to hit that maybe action is needed. we just saw on monday the slowest growth in the eurozone, among those 19 members, in 19 months. we're also seeing concerns about brexit about the italian banking crisis,, not committed a third election in spain. so no wonder we are starting to see a buildup of,w ell, expectations to downgrade. we could see the growth forecast next year downgraded from 1.7%. then we could see an extension to quantitive easing, past march 2017. are you really going to get inflation up to 2% when it is currently dwindling by march 2017? probably not. that needs to be extended by trillions of euros. so 80% of economists we have spoken to see some point if you very notably, could be a tweak
what they could buy an quantitative easing. when you have self-imposed limits, such as not buying below the deposit yield, which is currently at -.4%, that rules out two thirds of all german debt, all 30% of eurozone sovereign debt. so maybe they could tweak what they are actually allowed to buy. there all thee, intent the buffer. gilt market, euro market, where are we with his propensity to explain the distortion? there are distortions in the market. that is a fair statement, isn't it? caroline: i think it is pretty fair. this week manus, for the first tangle.saw a corporate, negative that you. pay forr is having to the privilege of buying corporate bonds, so desperate are people to seek the safety of debt. so that's sort of distortion is happening. there is also been reports that certain companies are actually
building up debt issued, purely to sell to the ecb alone. there have been reports and the wall street journal that certain spanish companies have been privately placing debt great into the hands of the ecb. that is not what qualitative easing was meant to do. so many will try to raise. and notably, the race to the bottom among the other central banks. we heard from yesterday in sweden, holding steady. but the overall saying, is the ecb does it, if we see mario draghi going for more quantitive easing today, my toolbox is ready to come out of the closet. so plenty of distortion beard and this is what the head of the central bank here in germany is a word about. are we blurring the lines between fiscal policy and monetary policy? nejra: caroline hyde in frankfurt. thank you. let us bring david stubbs, global market strategist at j.p. morgan asset management. david, the morning. using the ecb might actually -- david: i think on the interest
rate side, that is absolutely what we are expecting to the extension of quantitive easing is going to come, whether it comes today i don't really think it matter to investors. the idea that it was stopped in march next year i think is preposterous, given the inflation outlook, slowing growth, the downgraded forecast we are going to seem. and even more worrying is the last three or four months slowdown in the fall and unemployment. right? a very important and impressive performance in the labor market year. star little bit last couple of months, making me nervous as well. moment, probably staying the hand. but they will have some questions about how do you find more bonds to buy? that is constraining what they can buy? manus: there is a lovely line in the store this morning talking about mark carney's serenity. looking over a shoulder, the rating that mario draghi got. but we have the yield curve, you have the underused function on your bloomberg. and what you have here is european sovereign, the german
sovereign curve. this is six months ago. one year ago, six months ago, this week. this flat is. are you still --does that momentum continue in the bond market? and what is that due to corporate papers caroline was buried to, the compression of spread? david: we are still overweight credit. we still prefer government bonds. and i think within global government bond markets, it does make you a little bit nervous about some of this federation beard we saw the bund shot and out quickly -- 8% people losing total returns during the shop. maybe somewhat nervous. but you have that chart of there, definitely a little affect your deposit rate at -0.4%. they know they can sell bonds at the ecb yield, so you can work
out what the price would be. you see that curve coming down, flattening more and more. pendant two -0.4 percent. i am sure it does not get to the point where it is entirely flat. but i don't think it will stop getting there. that is the direction it is traveling. nejra: so in terms of the ecb options, in terms of a further rate cut and the extension of qe, changing the parameters, what do you think the best options are? david: i know they don't want to change t. that is pretty much like gdp, in terms of what they want to buy. but i would personally, if i growing, ip up bond was still go after corporate debt. i don't particularly want to buy bonds yielding less than the positive floor. i am not sure they should cut the deposit rate any further than that. over are question marks the efficacy of negative rates anyway, but they are going to own a small fraction of
corporate bonds by march. there is plenty of scope to increase that. and of course, you have the big taboo. the japanese, buying bonds not in their own currency. manus: and that could be the move. that could run to the currency effect, because if they buy better u.s. treasuries, or for that matter aussie bonds, that has an impact on currency. this is where i want your opinion. we have the euro-dollar. nejra find this morning. draghi's's cannot stop people run on the euro, but they morgan stanley said 5% rally to come on the euro. would you concur with that? is the rise of the euro inexorable? david: i'm not sure. i think the policy can stop it, if it wants to. but again, i think that is breaking a taboo. for me, when the currency cold war comes up, that if you
actually start buying different currencies. look, the chinese did it. the swiss national bank has enormous foreign currency assets. europe and japan have not gone there, so far. but you, can sense of desperation especially in japan. what that is doing to inflation. equity earnings. momentum in the economy. i think all things have to be on the table. if there was a central bank that is going, i think it is the boj before the ecb. nejra: what happens of mario draghi disappoints today? david: i am not sure. the market is not priced for him to do much. i don't think there is a big disappointment risk out there. but i do think he will face a pretty aggressive set of questioning about his options. butad questions last time, we haven't discussed that. i'm not sure that is credible. but they have a question about a huge amount, the same rhetoric we have heard the last two
quarters. what we are doing is working. we need time. unemployment is coming down. credit conditions are improving. interest rates coming down. borrowing is going up. goes. as she we will do whatever it takes. and i think that is what will will get. manus: pretty boring, david. do, do notever you want bloomberg today. [laughter] nejra: he is not staying with us. [laughter] stubbs stays with us. nejra: and will bring you that ecb rate decision, boring as it might be, at 12:45 u.k. time. 45 minutes later, you can watch mario draghi's news conference. and bloomberg customers can follow that on life go. manus: coming up, facebook anxiety. the fed survey of businesses shows unease as the election
well, ite emperor -- is not very the harbor in hong kong. there you go. i thought we had the palace. the hang seng up 4/10 of 1%. a nice day for the chinese economy this morning, hiking higher. on some of the other stories. nejra: 6:21 a.m. in london. the fads latest page book says businesses are increasingly anxious above the president election.
the uncertainty was cited as a source of concern seven times in twoaugust book, up from mentions in june. pre-election jitters are not as strong this time around as they were in 2012, when president obama took on mick romney. manus: china imports rose last month for the first time to 2014, as the exporters enjoyed attrition from a weaker overseas shipment.measured in u.s. dollars, they rose almost 6%. nejra: and japan's economy is showing signs of life, growing by an annualized 0.07% in the second quarter, more than a government initial reading of 0.2%. this gives the boj something to think about have the closely watched meeting later this month. manus: let's bring in david stubbs. he is global market strategist at j.p. morgan. looking at the language on the talking modest
growth. and williams sang the u.s. in good shape. your perspective and j.p. morgan we have a lotnt, of risk between now and christmas. where are you on the rate hike, the propensity for rate hike, and are using a modest recovery? which does the hat say? david: i think we're in the modest but sustainable growth ca m stillp looking, i think the source of strength is well-known. the housing market, you know the labor market still in fairly good shape, although the last labor report was somewhat weaker, looking at hours work. what worries me and what i think it's the fed on hold is a couple -- we still have the credible downside risk that businesses are in the middle of retention. profits in 2014. they have fallen 9% since then. you cut cap fx.
they have detracted from growth and they started to slow down, the growth in hours worked as well in the labor force. the fed does not know this is just an oil and energy related patchake, and a soft mixed with election uncertainty. we think it is. but if i was sitting with the fed, i would look for evidence of stabilization in capital spending and profits, and sentiment. i think we're going to get that. i don't think you will get that until the summer. that is after the election. that is when a hike. nejra: what about what they said on inflation. we had comments yesterday, saying the fed is likely letting inflation run hot. what is your expectation? david: on one level, you can see the obvious thing to do is to run inflation above 2% because it has been above 2% for year. janet yellen was asked specifically during her testimony, she said no. at all times not running hot
now. i think everyone believes she cannot quite say what she believes, which is there has to be a miss on the upside. i think is a great way to structure policy right now. i think the risk of some kind of inflation spiral getting out of control like we had in the 1970's is my new. inflation, with no problem at all. and think very little risk is what they are trying to do. they want a little bit of a range price spiral right now. that is good for the u.s. economy at this point. i think they would be happy to engineer that. manus: that momentum will carry through the global perspective. on the opening line you make the note that u.s. equities have the four narrowest trading ranges since 1928. i mean, this is the comparison. this is the s&p 500. the bandwidth is actually 1.5%, 39 days in a row. versus the economic surprises.
what does it take to jolt u.s. equity markets higher? some kind of retracement? david: statistically, when the market usually does this almost always it breaks upside. and one of the reasons why we do like the u.s. market at the end of the year, still overweight on u.s. equities. that is up your technical factor. are in ahat we fascinating point now because the rally in u.s. equities has priced in the inflection point in earnings, which we think will now start growing again after six or seven quarters of contraction, and that is probably already in the price. right? so, you know, what is it take? as i think you just heard, the election will create significant volatility on the stock and sector level, as the candidates get closer to the election. but i also think conclusive proof again about the outlook in the economy from the capital spending side will be crucial. nejra: and of course hedge funds shorting volatility.
nejra: there we go. there is the tokyo imperial palace. beautiful live shot. dollar-yen much unchanged. topics down 4/10 of 1%. manus: check your terminal. on your mobile. it is daybreak. type.s what you want to this is the story, the stories making it. there you go. all about mario. finally.io finally, is on the iphone. nintendo up 18% on the rally, releasing the game with a character. this is a game on the app store
and decent. just ripping it away. nejra: the next story is the other mario of the day, of course ecb president mario draghi. he will lay out growth and inflation projections for the euro area later. a little change from three months ago, but will mask an underlying picture that is changing dramatically after the brexit vote and banking crises. manus: focusing on the data out overnight. we touched on it at the start of the show. imports rose last month the first time since 2014. meanwhile, exporters and jordan attrition that was from the weaker, yuan. before the pcob. which takes is nicely -- nejra: perfect segue. intervention.amid ryan chilcote joins us for the market update. ryan: u.s. dollar mostly unchanged against the offshore yuan.
check out this new earlier in the day. this is obviously the dollar versus the offshore currency. what you see over here is the yuan quite sharply strengthening, then weakening, amid speculation that the pcob is intervening on the market to o encourage bearish bets. one possible instance is that roseost of borrowing yuan for the most in seven months this morning. pretty interesting, keep your eye on the offshore yuan. very interesting. next up, i have a little picture of oil here. because oil is up today. it has been all over the place this week. looks like it is poised to finish at above where it was. and the reason for that is the glut, or speculation that perhaps the glut is going to ease. i can show you that here. the white one is of course brent price of $.70 today. this is u.s. inventory.
they will get updated later today. when the u.s. department of energy comes out. theyesterday, the api, industry body that follows the oil industry in the u.s., came out and said they believe that inventories in the u.s. fell by 12 million barrels a day. if that is true, that is massive. and if we get that data from the u.s. government, thereof find that expect oil to move again. or alternatively if he was says no, actually such a big drop, maybe we see oil move on the back of that as well. finally, this is the greenback versus the taiwanese dollar. they're interesting. we don't talk about it every day. what you see right here is the biggest three-base hit of strengthening in five years. pretty much continuing to out the week. that is a taiwanese dollar strengthening against the u.s. dollar. why? because investors have been buying taiwanese dollars so they buy shares in iphone
component makers. in other words, a perfect example of a company moving currency. investors getting in, at least for domestic reasons, on the taiwanese dollar. buyingrs getting in, taiwanese dollars because they wanted to give it a the fact that now you have to buy a bunch of new components your iphone seven. manus: let's get more on that apple launched now. our bloomberg editor at large reports from san francisco. iphone, september announcement from the auditorium. analysts, thethe industry analysts as well as market analyst. of courselist, because this is presently a pr event. of all things, the apple iphone 7, the upgrade to the new apple line. here is tim cook. tim: and here it is. [applause] it is the best iphone that we
have ever created. this is iphone 7. cory: of course, one of the best ever. you wouldn't expect the second-best ever. i would not buy it. about driving the products of great cycle of the biggest device, the iphone. not just about the iphone. setting the stage for a number of new products. the iphone seven and seven plus was announced, as was the 2.0 significant upgrade to the watch, adding waterproof, partnership with nike. talk ofhermore, we saw a new technology around headphones. shiairbud, the mobile one p, to be used in a new series of thes headphones. a big fruition of the partnership between apple and the company they acquired, beats, a while back. listen to philip schiller,
senior vice president, talk about how much technology went into making the airbud headphones. >> there is so much technology packed into each airpod, optical sensors, beams and microphones, it is a technical tour de force in this new little airpod. cory: a new upgrade, really something people will see out there. in the way that the earbuds were a central piece of marketing, maybe these will have the same kind of affect on apple sales. they can only hope. cory johnson, bloomberg, san francisco. nejra: cory johnson in san francisco. is thek says that the 7 best iphone ever. but will it be enough to revive flagging sales? joining us now is richard windsor, founder of radio free mobile. great to have you. is this going to be enough to revive apples growth?
richard: personally, i do not think so. the reason being is that i think apple is taking a massive risk by getting rid of the headphone jack, because with every previous version of the iphone they have given people very strong reasons to upgrade and buy a new one. and getting rid of the iphone jack, possibly for some users, will actually put them off from upgrading. if i need a new iphone, perhaps i will buy the iphone 6 instead because i prefer to have the headphone jack directly in the device. manus: the irony is not lost on us. you have a wonderful headset, nothing like the minute apple earphone. getting a smash hit from china. will this be a smash hit in china? richard: the problem with china, from the china perspective, firstly, china is a much stronger android market because there are many lgs there. and apple had a great take up with the iphone 6. and potentially, i would look to
the iphone 7 to be a steady continuation in china. i don't is fairly see it being a revival. don't forget though, look at the global smartphone market. it is flat this year, quite possibly next year or even slight down.richard easilyi found it looking at apple more as a bond that an equity. talk about that. problem you have an apple right now is that if you look at the valuation, if you take out the cash you can bring apple down to about eight times earnings. which is you know roughly where broken steel companies trade. obviously, something wrong. to look at it in a different way, from the point of view at what cash flow or what cash is apple returning to me if i hold apple shares, and if you take a dividend they pay and the share buybacks that the company has done per share and divide that by the share price, you end up or so.number around 9%
and that if you look at it from a bond perspective is a very good yield. what you think the tax ruling against them in the republic of ireland might do from the cash flow? they need to say the shareholders, in terms of this maneuver, do you think this could invoke repatriation of cash, despite the moment. > richard: i don't think so. the problem that apple has with repatriation of cash is not the eu, it is the federal u.s. government. when you repatriate the cash i think you pay a 30% hit on it. that is why it is sitting in ireland not doing anything. that is the reason why if you look at apple have in raising order toble amounts in meet buy back shares and pay big dividends, because it does not want to repatriate the cash overseas. the launchard,
yesterday was very important because of the holiday season coming up is key for apple. what will you be looking for in the coming months? richard: what i will be really looking for is i don't think, put it this way. , turns the iphone 7 users off i don't think they will lose appleshare. they will not leave ios and go to android. what might happen is that those who were thinking about buying the iphone 7 might buy the iphone 6s, which is cheaper. and you would ardently see a decline in price, potentially in q4 and the gross margin as well. that is the key factor i will be looking to see whether or not the headphone jack is a problem. it is a big gamble. and they admitted it. manus: well, let's see how it turns out. richard windsor, founder of radio free mobile. the bank of england governor mark carney says he is not really a rate cut before the end of this year. speaking before the treasury select committee in london, he
said the risk of u.k. recession, after measures they had taken to stabilize the economy post-brexit. mark: i am absolutely serene about the comments made both by the judgments i should say, made by them. liquidity pressures that were met because of contingency measures that we had taken, in response to the judgments of the financial policy committee, absolutely validated the steps that we and other central bank authorities around the world have taken. nejra: still with us is david grubbs, global market strategist at j.p. morgan asset management. david, what did you make of that? david: i think euro promoted a of the action taken. i don't see how they could have done anything different. a central bank, you don't know what will happen. you are dealing with balance of fine if theytally
act to aggressively and have to take something back. raise interest rates little bit, sell some bonds. that is easy to fix. what is not easy to fix is if they undercut the response, suddenly they have a nasty recession and a deflationary spiral and they wish they had acted aggressively sooner. sink, hopeitchen that fiscal policy will change in the summer. i think we will. and maybe do more if they need to. manus: one of the debates, one of the issues is about the overt positioning of the bank of japan in the market. the wall that the ecb might run into. have a look at this. this is the gilt issue, there are three major ones, they are running into a brick wall in terms of the actual issuances they are able to get their hands on beard this is the global central-bank problem. on mostmonetary problem of the end of the row. is that what that tells me? david: you are seeing almost by definition the space for much
more running. running out, absolutely. but bank of england just dipping a to go in the water of the corporate bond market for example, it could go negative rates that wanted to. mark carney said he did not want to do that. there are assorted variety of other tools out there. but certainly when you look at the balance sheets and government bond markets in japan and the eurozone, and lesser extent here in the u k, you see that issue. this is one of the things we do not talk about earlier. i think that mark carney does hold up maybe they hike in december. i think they should start talking about ceasing the repurchasing of bonds when they roll off the balance sheet. allow the balance to shrink. the u.s. 10-year is at 1.6. and they said they would not do that when they were not going to, you know,, ceased of purchases that was two years ago. and it was much higher yield, short end was not negative in major economies.
they need to recognize in my opinion the scope for raising the short rate much more than i thought. they have a huge demand for longer paper. they have made a killing on the bonds they have bought. why not sell some or at least do not buy more when they run up the purchase as their do now. i think that is a part of the debate. the incident at jackson hole showed they are scared about talking about it. but are there members of the committee that have started to discuss this? i think it will gradually become a major discussion, certainly a lot more about it next year. nejra: i want to get your take about jackson hole there was a lot of talk of negative interest rates for the fed really not being an option. do you think the fed has enough scope other than that with forward guidance, with the balance sheet to actually manage, were we to have another shock? david: i think they have a lot of scope. obviously, they have the most
liquid bond market in the world. so much buying things, the years of aggressive things, for they run it is a bit like that. if they run to negative rates, they could work best in the u.k. in the u.s. because they don't have to go into it now. those are the places we are seeing very reluctant to do it. you know, in a real, something really bad happens, i think they would have to go there. nejra: yes. globaldavid stubbs, market strategist at j.p. morgan asset management. nejra: later this morning, we will be live at the global aviation festival in northern london are some of the biggest names in the industry are gathering. manus: and norwegian air shuttle move.and us on the soon after that we will speak to the iag ceo. nejra: and 10 clark will be with us just after -- tim clark will
manus: welcome back. you are looking at a beautiful shot of new york. 1:49. you were there last year. they sent messages. bring her back to the new york city, the city that never sleeps. tom can awaken you back on surveillance. matt miller, the less we say the better. we have futures indicated 21 spo.85.
markets are looking quite good this morning. futures up 1.25. dow jones up. and a nice little rise. nejra: let us to the bloomberg business flash. here is rosalind chin. rosalind: thanks. apple has announced updates to the iphone and watch.the iphone 7 line includes can upgrade from a faster processor, longer battery life, and a new industrial design. it also ditches the headphone socket to make room for other features. ceo tim cook: the best iphone we have ever created. but shares rose less than 1%. haveompany whose shares soared is nintendo. that was after it was announced after super mario is coming to the iphone. nintendo released the game featuring the game in the app store in the center. dob the first time the popular franchise has appeared on a smart phone. enterprise isd spinning off and emerging some
non-core software assets. the deal with the u.k.-based company is valued at about $8.8 billion. the assets include areas such as application delivery management, big data, and enterprise security. it is the latest move in ceo meg whitman's efforts to slim down. and that is your bloomberg business five. s nejra: flash. let us look ahead to the expectation surrounding president draghi's move. caroline hyde joins us live from the ecb in frank for. she has a guest. caroline: nejra, i do indeed. it is david kohl chief economist and head of fx research at julie's there. a beautiful morning. but not beautiful growth figures. how are you expecting the ecb to look for projections, will they be changing today? david: they will be changing
most likely. but they are really good, in line with our estimates. but only go to do thousand 17 and 18, they have a typical rising trajectory. and this might not be accurate. we see lower expectations for growth in 17-18. why? because we have a depreciation of the euro, because we have economic growth. i don't know if we had this next year in 2018. so some revisions down. but this is really cut and dry marker. caroline: might be downgraded to 1.5%. david: exactly. 1.6%, this is probably more accurate forecast. caroline: will quantitative easing be changed? do you see an extension past march 17? the extension. but what is crucial is when is
the right moment to announce that? also, with this announcement they tend to have announcements of risk aversion when it is too high. we look at markets today, risk aversion is not there. there is a lot of risk appetite and a lot of complacency, low volatility, really no need. light wheneep it things are getting worse. 2016.ne: at some point in talk about the lack of volatility. 23% lower than we have seen any of the previous meetings. we have the trading barrier of basis point.in david: we have sunshine in frankfurt. it will not last forever. not in 6-8 weeks time. it becomes more volatile. and people will enjoy the holidays, enjoy the good summer. this might help if people are
more complacent. he will get more in point really. economic forecast later this year. that would be the right time when markets are more shaky, or questioning also the growth outlook. we need more time to announce the extension of quantitative easing, to ensure markets, yes, we do more. we stick to do something. caroline: 80 billion euros per month is a trouble when you have two thirds of german debt -.4%.g do you see that chaining, anything being effective? david: they have been already hinting that the ecb might be ready to lose this rule of the zoning third percent and not more. this would be most effective, looking for more volume which they can buy. we think also this will come with an extension. caroline: will germany agreed to
this? how will the ecb members swallow such a move? david: i think quantitative easing goes through quite smoothly. it would be a different thing when you touch again negative interest rates. i think this is a topic where not only inside the ecb but also globally central banks disagree, that this is the right measure to adjust economic weakness.we think there will be more positions , luckily no signs they will lower this negative interest rate. so i think the discussion will rather just move, when financial markets worry, when the outlook is more uncertain, we have to say is much easier to convince that. caroline connan we have 60 seconds left in the talk. what is your top risk? is it brexit? italian banking? spanish elections? david: more on the italian and french side. brexit not much of an issue. and look also the u.s., the
growth really recovers as everyone expects, you have u.s. and british beverage and growth in the eurozone. france and italy on the one hand side. spain and germany on the other. : caroline: and that will work? david: well, something worse. at least signaling the effect in the market. we will see how much this really happens to the economy. a lot of it has to be done outside the ecb mandate. outside the ecb possibility, basically looking at fiscal policy. caroline: one thing we can be certain of is that mario draghi will be talking on the fiscal policy from. of ethics, he is head research. not expecting too many changes the for today. back to you in the studio. manus: caroline, she is all the great guests. you got wilderness behind you. there for the day. great interview.
manus: draghi's big day at what measures -- big day. what measures -- willoughby lucky number seven for apple? new iphone is reviving sales. what -- where has the innovation gone? is in china's export cushioned by a weaker yuan? surges to a seven-month high. ♪ "on the move." -- seven-month high. ♪ you are welcome to countdown. i manus cranny. nejra: i am nejra cehic. . am looking at my terminal
we looking unchanged on the euro stoxx 50. ftse 100 futures edging higher by .1%. dax futures unchanged. the same for cac 40. a little bit of a quiet day. looking at msci and that was pretty much unchanged. a quiet trade ahead of the ecb rate decision. manus: the chinese have intervened in terms of the price of money. -- thatt is up to 5.3 ratchets up to 5.3%. column that's been called. column. emerging markets drop for the first time in a week. new zealand dollar up for seventh day in a row. that is more of a rich -- of a reach for yields.
the probability of a rate cut drops to 21% by the new zealand from the reserve bank of new zealand from 33%. 392.r korean won bank of korea meets tomorrow. they are expected to remain unchanged. the korean won is oversold. 1.7%, rocking today's inventory drop, 1.2 million barrels overnight in the u.s.. the iranians saying it is too early for a freeze. a bit of push and pull. the dollar you want is one of the cornerstones of the market this morning. nejra: we've got rosalind chin in hong kong. >> apple has announced updates to the iphone and watch.
the iphone seven line includes camera upgrades and a new water resistant design. tim cook called it the best iphone we have ever created, but others -- but others were not so amused. since 2014first time as the country's exporters cushioned by the weaker yuan. shenzhen.% in the cost of borrowing you -- cost of borrowing yuan+++
discourage bearish bets on the currency. it offered rates 3.88% to 5.4%. japan's economy is showing signs of -- 0.7% in the second quarter, more than the government's initial reading of 0.2%. this gives the boj something to think about at of its meeting later this month. policymakers will release their review of the central banks policy -- central bank's strategy. anxious about november's presidential elections. the uncertainty is cited as a ,alt -- as a source of concern up from two mentions in the july survey and none in june. the u.k. housing market gained momentum in august after the shock to confidence caused by the brexit vote. its house price gauge rose. more real estate agents reported appreciating prices.
in london and remained negative for six months. -- formula one motor racing. it initially will pay $1.4 billion in f1's parent company and will take full initiative later. in founder of formula one 1978 will remain ceo. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. you can find more stores on the bloomberg at top . i'm rosalind chin. this is bloomberg. nejra: is a much good we've got action -- breaking news from ex and car phone. we've got like for like sales for the first quarter in the u.k. of 4%, that beat estimates. the key thing is dixon car phone sees no detectable impact of the brexit. mental as you break down some of those numbers, u.k., a little
.it -- europe is storming away like for like sales in southern europe for the first quarter were up 13%. let's see how the stock opens up later. a market check in asia. shery ahn, good day. shery: good morning. we are seeing asian stocks a little bit mixed. the benchmark index is falling for the first time in four days. we are seeing those commodity producers as well as health stocks leading those declines. not surprising that the big miner australia down .8%. the nikkei is down .3% after revised gdp data shows the economy has a little more than expected in the second quarter by 0.7%. investors reassessing whether or not the boj will carry out more stimulus measures. we are seeing emerging markets falling. thailand more than 1%. mosturse we have seen the
funds pulled out of the country in more than year on friday. no surprise we are seeing some rebound. we had some better than expected trade data out of china. shanghai composite has been positive and negative territory all day. right now it is down .1%. in the last 17 days, it moved less than 1%. the volatility reaching a two-year low. we are seeing some speculation of intervention by the pboc in order to discourage bearish bets on the yuan. you were mentioning the hong kong highborn, the cost of borrowing yuan, that is climbing to a seven-month high at 5.45%. analysts saying this is quite expected given people aware that
people were looking at depreciation of the one following the g 20, so china taking some action on that front. .67on short yuan at six that's at 6.67 -- at 6.67. manus: few economists forecast that there's going to be a change in rate though. today under a survey by bloomberg, expect to see some action, most likely the prolonging of quantitative easing. usra: caroline hyde joins live from the ecb in front for it -- in frankfurt. is the market expecting any action today? ? they are expecting -- caroline: they are expecting on the projection side of growth. we saw those busy numbers coming out on monday.
figure couldar's be downgraded slightly to the growth estimations. in terms of rate cuts, not expecting any. decisions to extend quantitative easing past that march 27 deadline. does it go today echo does he -- today? does he tweak the bonds that they can buy. much of the german debt, about two thirds of it, is below the deposit rate. that is a rule of the ecb that they cannot go by debt that potentially they could buy below that rate. they could buy more than a third of each individual bond issued. all of that has its own repercussions. ecb becomes too much of a powerful buyer between each
issuer. maybe we see yields go lower, people chasing that deposit rate down. many a question but when volatility is so low, you are seeing a be stock, 23% below the usual. -- bond trading the lowest since 1991. you heard from david kohl, maybe keep your powder dry. manus: keep your powder dry. draghi is likely to have some explain to do. look at what happened to mark carney yesterday in front of parliament, perhaps moving to early after brexit. draghi has some explain to do. caroline: he does. look at what happened this week. a corporate managed to sell debt with a negative yield. investors are paying companies the privilege of holding their
debt. these are uncharted territories in terms of quantitative easing. we have seen the riksbank come out yesterday did not make any change to their rates. ?s there a race the case among monetary policy banks to start having to act as others do indeed? there is concern that individual issuers, potentially some spanish companies, are they selling debt purely to sell to the ecb? that is what quantitative easing was meant to do. get -- investing, get banks lending. is that happening? questionable, and is it enough to drive up inflation tackled that is -- inflation? that is the key question.
nejra: caroline hyde in frankfurt. -- ubs joining us now. karen, i wanted to start with looking at the lack of volatility in eurozone stock heading into this meeting. -- underchart showing the stoxx index. we are seeing low volatility globally, but in europe, what is this function? karan: you have been through a pretty volatile. -- volatile period. they're just on to look a little bit better. with the ecb, we don't expect much come out of it. to moveealize we need into more of a fiscal stance. a bit more relaxed about the sox are behind this. lowtility has not been this since the ecb kicked off qe.
it is surprising. it is funny because some people think the market is too relaxed because of volatility. in europe, -- one is the value gap between cheap inexpensive within europe and within sectors are the biggest globally. that means crowding. in europe, you're getting the most crowding of anywhere in the go toto growth quality the top dogs if you don't trust anything else. it suggests fear and that is completely at odds and what you are shown on the chart. mental you are right -- manus: that is right. perhaps there's crowding at the top tier. what does that mean -- this is the dax. this is the personification. 2016the array of losses in -- are you expecting a paul's in
the momentum -- expecting a paul's in the momentum? karen: it is the opposite. we lack of them by 60% on a performance basis. the chart looks like that. it came out of this whole tenure crisis. that's whole 10 -- whole tenure crisis. -- 10 year crisis. we are not back to where we were able 2015. what this crowding means is europe has profits that is always back. europe.otal profits in that means you don't trust earnings and you crowd around if you growth stocks. nejra: when a we going to start the inflection point? when are we going to see this shift favoring the u.s. to moving to europe. a lot of people are thing to
maybe favor europe but we are not seeing that move on any sort of large bases? karen: international investors --e asked for an honest where that analysts overestimated earnings by 120% in the last decade. we have had no profit growth in 10 years. it went up a bit and then came back down again. the euro destabilized. it is up, down. the third thing is structural reform in places like france. they are saying we have not seen profit growth in 10 years, i don't think i can trust you. if profits turn and you get a little more fiscal support, i think that is a fantastic side to get investors back in. manus: karen, you are going to stay with us. we have the lines come through on iraq. they say they have given the opec members output levels.
there -- they have not said the -- iraq can support a freeze for a certain period of time. brent crude 1.71%. more to do with the dollar and inventory than inflation. nejra: we were seeing crude gaining earlier. it is picking up a little bit a tiny bit there. facebook anxiety. the fed survey that shows unease as the u.s. election nears. we have a chart. this is bloomberg. ♪
a beautiful. bresky to business flash -- nejra: skidoo bloomberg business flash. get to -- let's get to bloomberg business flash. design -- to make room for other features ceo tim cook calls it the best iphone ever created. others were not so enthused. shares rising less than 1%. one company whose share price has a sort of following the apple event is nintendo after it announced that super mario is coming to the iphone. nintendo will release a game featuring the character in the app store in december. it will be the first time that the popular franchise has appeared on a smart phone. a newas released supercharged version of the playstation 4.
dp has four pro is designed to run a virtual reality games and play high-quality for kate video. the company announced a slimmer version of the original ps for four.s four -- ps -- more than once or twice per decade. some major global brands are having to think how to get their products to the customers after the collapse of pungent sipping -- hanjin shipping. tuesday itaid on will provide $92 million to help deal with supply chain disruption. that is your bloomberg business flash. it beigee fed's latest book says it businesses are anxious about novembers elections. the uncertainty is cited as a source of concern seven times.
that is up from two mentions in the july survey and none in june. the election jitters are not as strong this time around as they were in 2012 when president obama to go on mitt romney. manus: -- exporters enjoyed a cushion from a weaker you want. overseas shipment fell by 2.8% when measured in u.s. dollars. they rose almost 6% and you want terms. nejra: japan's economy is showing signs of life. a group in the second quarter -- it grew in the second quarter. this gives the boj something to think about ahead of this closely watched meeting later this month. manus: karen olney is with us from ubs. when we talk about the beige book. we talk about carney. the amount of stimulus that is in the system is still colossal. does that still invoke a case for global equities?
karen: it is interesting because europe looks the most interesting globally. low rates hurt it because it has a higher financial rating. all of these things that need a fiscal spending and inflation. i don't know if i answered your question. pushing global stock valuation but europe within that has not written the same wave it would benefit from interest rate increase. manus: you talked about the flow of money. the wall of money that was not coming in. there was this lack of enthusiasm from u.s. investors. has that changed? karen: we had the most net -- from u.s. lifted etf's. what we are finding, it seems to be stabilizing. we are getting a lot of phone calls from u.s. investors because of the valuation get between u.s. and europe.
about a 30 year high, this gap at the moment. people are starting to say has it gone too far? either stay or go. you give up because profits have not moved in 10 years, or you say enough is enough, it is time to -- it is time for things to normalize. further that's how much further do you think the bull run has to go in the u.s. of course we got higher valuations in the u.s., yet investors still keep buying the s&p 500. i've spoken to people who have very bullish polls on the year-end. what you are talking about right now is the crowd i was talking about a minute ago. europe being the value place. everybody is going for quality, growth, security. --t tends to be the u.s.. tends to be the u.s.
that is topping out now and that is why you -- have we put the crisis behind us? you saw the fiscal austerity drag and the commodity fall. those have all three based to something pre-2003. we can go back to saying europe has been hit four times, but it is a tricky one. manus: to your mortgages and for your mortgages in the u k and five years, they are plummeting. it is to invoke the discussion which is where are you on u.k.? this is about the consumer in the u.k. if this is the kind of transmission mechanism to the real economy. wonderfulve got this window where we have had no brexit yet. people are cheering in the street saying brexit is not too bad. we have not had it so the pain
could becoming down the road. we have no idea what an exit is going to look like. i think the u.k. market are looking pretty fairly valued. have gone up as the currency has fallen. he needs to fall a lot further than that to support that. maybe the 250 will hold up where it is because the consumer is feeling happy. nejra: just a quick question for you, stimulus has partly driven some companies issuing bonds and yields below zero. is this of any concern for you? this distortion? respects helps in some . if some companies were to reissue their debts, we would show an 11% boost to the european earnings. it may start to push share buybacks. the u.s. has had a load of share buybacks. nejra: karen olney at ubs, great to have you. thank you.
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you don't see that every day. introducing wifi pro, wifi that helps grow your business. comcast business. built for business. manus: you are welcome. this is "on the move." berlin.30 in we are counting down to the start of european trading could alongside me is caroline hyde on a mission in frankfurt. here is what we are watching, draghi's big day. what measures might the ecb president announce to aid euro area economy echo we're live in front for it -- area economy? we are live in frankfurt.