tv On the Move Bloomberg September 22, 2016 2:30am-4:01am EDT
>> welcome to "on the move." we are counting down to the european open. i am nejra cehic alongside caroline hyde. guy johnson is in munich. here is what we are watching. a risk revealed. yellen revokes pressure to hike as investors weigh the first triple defense within the foc since 2014. stocks and bonds rise as the dollar drops. we'll bring you the latest moves off the fed. .learing out
why executives at global investment banks in london expect the u.k. to lose its $570 billion business after brexit. caroline: it is looser for longer. less than half an hour before the european open. looks as though we can add fuel to the risk appetite fire. we can take a look at how futures are trading, up .4%. no significant moves. saw the s&p 500 surged about a percentage point yesterday. nejra: caroline, the gift that keeps giving the central bank says you're talking about equities for futures. we have been seeing gains in asia. the msci asia pacific index gaining 40 sixth day. a different picture than test for a sixth day -- for a sixth day. you can see at the end of might gmm function, you've got the commodities gaining.
you're not seeing oil but i can tell you oil is rising after we got that inventory data out on the u.s. in terms of what is happening in the fx market, you can see the bowe bergdahl index up by .2%. the dollar weakening for a second day -- you can see on the bloomberg index up right to point -- up by .2%. the dollar weakening for a second day. if we take a look at what is happening at the bond markets, we have not seen the treasuries trade in japan trade, but you are seeing yields move lower could we got some of the asian markets, 10 year yields and south korea down. new zealand, the 10 year down 12 basis points. caroline? caroline: interesting moves. risk appetite as with the punch bowl keeps on giving. talking a punch bowl, talking of bones, our guy johnson made a well-timed journey over to
munich. he will be doing some serious work. guy: it is. it happens to be happy serendipity that the oktoberfest is on in munich. a lovely town made more lovely i the oktoberfest. i am here really -- more lovely by the oktoberfest. talked about that this is a gift that keeps on giving. many of the people will take a different view of that. they see the world through the fixed income lens. so much of the fixed income universe is now in negative territory. forced into other assets, illiquid assets. that is a very painful process. they are not on board with what the central banks are doing. we will bring you more of what is coming out of munich later. let's get everybody caught up on what is happening around the world. here's juliette saly with the bloomberg first word news.
the governor of north carolina has declared a state of emergency and called in the national guard as the second night of protest over the fatal protest that's the fatal shooting of a black man descended into violence. the march was largely peaceful although officers did fire tear gas. one protester was shot and injured. officials say police did not fire the shot. new rba governor phillip low has made his first look statement that taking over. he told the committee that he expects inflation to remain low for some time. it will pick up as the labor market strengthens did he says it is in the test strengthens. he says it is in the public interest -- inflation nutters. >> the bankbest -- has been a proponent of flexible rates. we have not seen our job as keeping inflation within a
tight, narrow range. we have not seen this we have not been inflation nutters -- we have not been inflation nutters. juliette: facebook ceo mark zuckerberg and priscilla chan are pledging more than $3 billion to work on curing diseases or do they plan to work with scientists, doctors, engineers and universities. zuckerberg says after speaking with experts, they believe it is possible to cure all disease. global news, 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries. this is bloomberg. caroline: juliette, thank you. all about the fed. the federal reserve chair will delay a rate hike given -- giving the u.s. economy room to run. bloombergs erik schatzker has more on the fed decision from washington dc.
>> no change in interest rates from the federal reserve but a strong suggestion that we will see an increase by the end of this year. those are the big takeaways of the meeting of the federal open market committee here. janet yellen was under some pressure to explain why the central bank did not move now, and she tackled it in a news conference. exit economic growth which was some -- >> economic growth which was subdued seems to have picked up. household spending continues to be the key source of that growth. spending has been supported right solid increases in household income. as well as by relatively high levels of consumer sentiment and wealth. >> yellen continues to believe it is less risky to wait too long to tighten monetary policy and to pull the trigger too early and possibly cause a recession. i took the opportunity to ask yellen why the fed still expects
to raise interest rates by 250 basis points over the next four years after lowering its projection for gdp growth over the same period. the same answer, productivity. >> we have further written down our estimate of the longer run normal growth rate. with that -- what that reflects is an assessment that productivity growth is likely to remain low for an extended time, although it does not buy into the expectation that it will pick up from the missable half percent days per year -- the miserable have percent pace we have seen over the last five years. >> she took questions about the fake account scandal at wells fargo saying the fed will look closer at the banks compliance. she insisted when asked about donald trump's allegations that the fed is keeping interest rate low for inches -- for political reasons that the central bank is
independent. >> i have no concern that the fed is politically motivated, and i will show you that you will not find any signs of political motivation when the transcripts are released in five years. >> erik schatzker, bloomberg at the federal reserve. nejra: our guest is jonathan bell. great to have you. you heard summary of yesterday. i want to take you to my bloomberg where i've got the dot plot up which was a topic of discussion. markets are reacting to this decision as if it was a dovish one. i want to highlight that yellen did say the differences came down to timing, not whether they would go with the hike. how are you reading? jonathan: i suspect they have been clever and avoiding -- remember last year when you get the interest rate hike, markets were worried. even three weeks ago, markets
worrying about the next rate rise by flagging it so well, that we are not getting it now, but we are going to get it in three months time. hopefully when you get the next rate rise, you do not get this market that creates a reflexivity problems. guy: let me pick up and all up on that -- go on that -- and dwell on that a little bit more. where only at 62% at the moment in terms of that december -- we are only at 62% at the moment in terms of that december rate hike. the numbers point to it, the number of votes went to it. what is it that could stop that happening? jonathan: i agree. i think it should be much higher it what you have got is two months where anything could come up. although he up to the middle of december. periodgot this long
where if there is some significant move that could change their opinion. i don't think they will see that. there are people thinking there is going to be something in the next three months that puts them off course. over time, i suspect that 62% will slowly rise to up around 80% ahead of the rate rise in december. nejra: i want to get a sense of the overall visual rate, the long-term mutual rate. much has been discussed about whether they should be dragged down. is this too little? many feeling that this is not quite as dovish as it has been digested by the markets. jonathan: the neutral rate has been coming down. they reduced the long run rate of gdp growth to 1.8%. that is significant. you've got a neutral rate that is 1% over that. -- therescopt for that
is scope for that to come down. low growth for longer, so it is part of the cycle that we are in. nejra: speaking of that neutral rate, yellen argued that monetary policy is not easy. she said it is not fueling bubbles. do you agree? jonathan: it is not commodity of at the moment. you are a long way from your neutral rate. if that gdp growth pretty close to the long run rate. the only thing that is undershooting is inflation. we could slowly get to something more normal, but it is because of the markets at the moment. with consent -- we are concerned that a small rate rises having a big change on people's , spending habits and
investment habits. nejra: we are going to be big into some your asset calls in a moment. jonathan bell staying with us. coming up, we talk the next central bank to release decisions. where live in south africa ahead of the announcement. who will be in the passenger seat with apple? maclaren denies but the tech giant is said to be in talks with a motorbike startup. fed up. we have more reaction from investors and economists. this is bloomberg. ♪
nejra: let's talk to bond markets. bill gross says the timing of -- has just been delayed. >> the timing of a bond mayor market has been delayed. let's not be -- bond bear market has been delayed. lastnk that can come with night with what happened in japan. what was important in terms of yields in bonds levels as well as the stock. guy: bill gross talking. let's get jonathan bell to take on this. let me ask you a question which is fairly straightforward. why am i investing in fixed income?
jonathan: i think it is a good question. are gross is right that we going to go into a bond mayor market -- bond bear market. we had a bond bull market for the last 30 years. years look at the 40 before that, had you bought u.s. bonds, you would have lost about 1.5% in real terms every year for 40 years. the change in a bond bear market is something of what we're looking at is just not about will be see bonds fall. it is about what is the return going to be? you can see that, just look at inflation. with the returns you are going to get in the u.k. over the next 10 years, you lose 1.9%. -- in factill lose
you will stay about the same. in germany, you will lose about 1%. the question is how quickly and quick -- how quickly and when does it start? nejra: would you place yourself in the credit spectrum? -- where would you place yourself in the credit spectrum? short dated high yields. you can get good returns in high yields by keeping it short dated, you reduce the duration risks and the credit risks. you should have a better idea of it. if you are buying something -- caroline: when bill gross says look further along the curve and you got pimco adding to the situation, you do not agree with that? jonathan: i think that is a mistake. when you're hoping for is -- if 1997 andck to
deflation sort of started in japan, had you bought long dated bonds, you would've got a return in buying short dated bonds. if the u.s. and europe were in the same scenario for the next 20 years, you buy long dated, because look at the shape of the yield curve, you'll get a better return. it is a high risk trade. -- the bank banks of england is opening as well as. that's opening its wallets. -- opening its wallets. there is a great pullout in the form of the governor of whatever central bank we're talking about. isn't that the trade? you're dealing with a counterparty that will buy at any price. jonathan: that is true to a certain extent. in japan, they're going to keep the 10 year yield at around 0%. if it stays at 0%, they are not pushing that you'll get a better return. clearly in japan you
got 40% of gdp -- jg be owned by the bank of japan. they have already had an impact on markets. that is not going to have a huge impact on prices going forward. that you like the fact japan is targeting the yields? jonathan: they are really struggling and it is a part of the problem of what is monetary policy doing and how successful is it? japan having done this is assessment, they say it has been successful in preventing deflation. negative rates are a flat yield curve. there tried to think how do we avoid those problems and one is by targeting the yield curve. i don't think it is going to make that much difference. been talking about the juncker so i thought let's show it on the bloomberg. you see the flattening affect -- yield curve, so i
thought let's show it on the bloomberg. you see the flattening affect. jonathan: u.s. corporate bonds, you've got perhaps a better trade in your sculpted bonds then you have -- u.s. corporate i prefern you have -- them over european because of that reasonable real attempt. it is a low return, particularly the higher grade the better risk. yes, more attractive than europe. in terms of tips, you have got still a pretty low inflation expectation, a break even inflation rate is somewhere around 1.5%. but even inflation rates in the close tot is pretty the inflation we may see over the next 10 years. i don't think there's anything to govern for the moment.
maybe another interesting trade, it goes for long dated. think at some point they are going to be successful in getting inflation back into the economy. at that point, inflation can have a really big boost. him a decade to get inflation out of the system. he goes to the long end and maybe get a trade to work. what do you say to those people that say what we should be doing is getting into less liquid assets? we should be getting into more infrastructure. we could be on it -- we should be owning assets. those are less liquid but nevertheless carry a yield. he pointed to the fact that we are starting to see a turn. how risky is that kind of trade? jonathan: i think it is reasonably risky pit one of the reasons, as you mentioned, -- reasonably risky. one of the reasons, as you
mentioned, one of the asset classes everyone was talking about is property leasing. perhaps that is no longer the time to be investing in it. nejra: townsend bell, staying with us. we are minutes away -- some of the bell, staying with us. -- it is unattractive it profitability targets. france's edf shrinks its range and we talked to miners there. details next. this is bloomberg. ♪
nejra: 7:54 in london. breaking news, -- splitting itself into -- this is the end of a strategic review for the chief executive. this stock traded in copenhagen. it will split apart the transport part of the business away from the energy oil part of the business. all business will require different solutions. they will find solutions for oil within 24 months. two separate divisions, really the pain from the oil market and the disruption that we have seen. the prices have fallen means they are trying to separate where they need to regain and step back on commodity exposure. guy: a couple of quick things to say. let's take a look at this. the stock split, something people have been talking about
>> good morning and welcome to "on the move." right here in the city of london alongside caroline hyde in berlin and guy johnson in munich. caroline: risk revealed. yellen rebuffs pressure to hike. stocks, bonds rise as the dollar drops. we'll bring you the latest market moves of the fed. we'll bring you market reaction right now. and clearing out why executives at global investment banks in london expected the u.k. to
lose its $517 billion euro clearing business after brexit. we're getting into the market open. i want you to keep an eye on them splitting up the business. energy on one side and the other side transport and logistics. ep. remember it costs you just 109 this will danish kronor. let's have a look at how things are opening. going into the stoxx 600, we're in the gray. revving up ey are in terms of the open. you see the u.k. opening higher. it is an outperformer. along with germany. he netherlands are up .25. the european markets, let's dig into the individual leaders now. >> before that, i'm going to take you to the gilt market
open. we have been seeing yields come down in europe, continental europe and also in asia. this is the u.k. 10-year yield over two days. all i have to say is wow. down seven basis points. you can see it dropping here at the we'll see if those losses and the yield continues through the morning. the stoxx 600 green across the board. every industry group heading higher. a different picture to yesterday where of course we saw the banks and insurance companies leading the gains after the bank of japan tweaked its policy. if we take a look today, it is energy stocks leading the gains up 1.3% and following behind materials up 1.3%. we are seeing commodities higher today particularly after the u.s. inventories data. let's take a look at the stocks i'm watching.
you mentioned a.p. the first stock i want to take a look at here. it is going to split the group to have two separate division, transport and logistics on the one side and energy on the other. it is going to find solutions for oil within 24 months because the oil businesses will require different solutions. the c.e.o. will continue. it is going to become an integrated transport and logistics company. we're not seeing the stocks move kwiatkowski yet but we will bring it to you as soon as we do. e.d.s., i wanted to show this stock at the open. it cut its profit forecast citing safety checks. we're seeing that down at the open, down 1.4%. -- e.d.f. caroline?
caroline: i want to get the opinion jonathan bell. we have had the breaking news across the screen. the chief executive will continue as group c.e.o. but also a new person at the helm in terms of energy. what do you think of these companies reorganizing themselves particularly after oil prices have remained range-bound at the moment. does it seem right to split off your commodity exposure? >> it is a difficult environment. you have energy is difficult. but also trade volumes are struggling at the moment. on the logistics side as well is an area they need to look at and sort out. i don't know enough about their capital structure and where they are looking to get the money to invest in the energy side from. it is certainly a difficult market at the moment. guy: let me talk to you a little bit about commodities.
they are seeing huge outflows. we have seen that very, very clearly. nevertheless, you kind of wonder if geerting to the points, you worry about whether or not actually in a world where we don't want to invest in equities, where we're nervous about fixed income, pushed into aircraft leasing that commodities are the place to go. could the commodity path be the place to be now? >> commodities, we can split out oil and metals and look at them separately. in terms of oil, you still have a problem of slight oversupply in the market. you also have a real issue in terms of how you control that. we'll see that coming out of the opec meeting because the shale producers in the u.s. are much more efficient today than they were 18 months ago and in the last few months since may we have had 98 new rigs open in the u.s.
so they can operate at these sort of oil prices. it is difficult for the oil market to see how you get much more strength. but within the energy, the energy equities, those that are able to make money at these sorts of prices i think is probably good value and it is worth looking for those. elsewhere in commodities you have the same problem of oversupply that you have had a long period of mines being opened. it gives the potential for a reduction in supply that will boost the price and give some profits down the road. it is an interesting area to look at. it is one i keep looking at and thinking should i be adding that to our poirls? caroline: talk about how you are assessing those various parts of the commodity markets that you have mentioned with relation to equities.
we have talked about the correlation between the oil price and stocks, miners are a big theme this year. how are you positioning yourself around all of that? >> on the energy side you need to look at the miners, they make money at these sorts of prices, look for people, $45 are aible to continue growing and investing. you have a problem with a lot of the majors is you have to look at the dividend yields. the payout ratios too high. look at those. we have increased our energy exposure. they select the individual equities. we have increased that exposure. on the mining side, we have looked to increase it but we aven't yet increased it. guy: is it time to sell your bond proxies in the equity market? >> really, really difficult question. because the central scenario
that i think all of us have is that we're in a low rate, low growth environment. bond proxies are the areas that everyone is invested in. the problem i think we have with the bond proxys is that bond and equity markets are becoming more correlated. you can see that today that both bonds and equities go up when we get dovish news out of the fed. when we get hawkish moves, you'll see both fall together. there is a correlation there that i'm uncomfortable with. if we stay with the low rate environment, they will carry on working, i think it is worth coming out of them because the risk is increasing not only if there is a rate hike but also if you get something out of china that knocks markets in the direction towards recession. >> today miners outperform. gold has been envogue. up 1.5 yesterday. you stick with that through
september as get hints of a rate hike? >> bonds and equities could be correlated in a downturn. the two great diversifiers are cash and gold. that's why you keep them. i'm overweight both. >> jonathan bell stays with us on the program. coming up, crude crunch. u.s. stockpiles drop to the lowest level since february. oil rallies in celebration. then dissent in the ranks. pressure mounts at the fed as three officials break con acceptability. we look at the mighty struggle at the world's central bank and the b.o.j. bails out japan's banks with some inventive policy. will the e.c.b. follow policy? this is bloomberg. ♪
nejra: 11 minutes into your trading day. welcome back to "on the move." separating itself into a transport and energy company as denmark's biggest conglomerate concludes its three-month strategic structural review. the chief executive will continue and a c.e.o. is named for energy. when the u.k. announced its rexit they ousted their c.e.o.
m.r.r., currently has been climbing the ranks at the moment. let's have a little quick update on this particular screen. it has been generally trading a little bit high. b.h.p. billiton up 4.4%. miners envogue. metals trading higher. gold got a bump on the back of the federal reserve. this is your best performing stock last year. in excess of 100% in terms of its rewards. e.d.f. on the downside. the french energy company, it looks as though this particular company has been seeing its significant concerns. they have been downgrading their profits in terms of their outlook. let's get to the first word news. >> caroline, thank you. the governor of north carolina has clared a state of emergency and called in the national
guard as a second night of protests over the fatal police shoot overing a black man ascended into chaos and vie officers did fire tear gas. one protester was shot and critically injured. police did not follow the shot. philip lowe has made his first public statement since taking over. he said he expects inflation to remain low for some time. it should pick up it is a labor market strengthens. he said it is within the public interest to keep inflation at % to 3%. >> a proponent of what known as flexible inflation targeting. we have not seen our job as trying to keep inflation within a nice, tight, narrow range. we have not been what some have called inflation nutters.
we have had a more balanced -- recognizing that some degree of varyability of inflation from year to year is inevitable and appropriate. >> mark zuckerberg and his wife are pledging $3 billion over deck for curing disease. they believe it is possible to cure, prevent or manage all disease. this is bloomberg. caroline? caroline: thank you very much indeed. south africa, rate decisions in africa this week kenya announced an unexpected cut by 50 basis points. today it is south africa's reserve points turn.
give us what is expected from the sarb today. >> the inflation rate fell below the 3% to 6% target that the central bank naturally targets for the first time in august and those numbers came through yesterday. analysts and economists really feeling that could give room for the central bank to keep or extend that pause that it put on the rate tightening cycle, tightening policy in july. we know that all 24 economists in a survey conducted by bloomberg have said that they expect the central bank to keep their repurchase rate at 7% this afternoon. guy: let me pick up. it is guy in munich. let me talk to you about what's happening with the downgrade and the impact on what's happening with the rand. debeers has come out and voiced their concern about the
downgrade. >> we know that moody's said earlier this week that there is probably about 1/3 a chance of 1/3 of a possible credit ratings downgrade. that seems pretty low. at about 30%. it did say that growth is a fundamental concern. political staket is a concern. we may see the central bank extending that pause on the rate tightening policy cycle. just to keep room for growth. south africa's economy reported 3.3% growth in second quarter. that was definitely a good recovery but still something that ratings agencies will be eeping a close eye on. nejra: thank you so much. jonathan bell is still with us onset. i want to broaden the conversation to emerging markets in general. i have got this chart here on
my bloomberg showing the earnings recovery really, the estimates 12 months e.p.s. surging in emerging markets. that is the white line outpacing its peers in developed europe. at the same time you have the likes of goldman, morgan stanley saying that no emerging market tantrum rerun is likely to happen. are the fundamentals better in emerging markets do you think? are they at less of a risk of tightening from the fed? >> first of all you're talking about earnings, the problem with earnings is that you look at europe and the u.s. and there is not earnings growth. where do you find? you look to asia. you can find country where is there is good earnings growth across the board. when we're talking asian emerging markets it is difficult. you think of those coming from south africa. you think of where somewhere like india where you have good
growth in terms of earnings growth. asia and emerging markets, southeast asia, i'm talking about i think are two really interesting areas to look at. you have earnings growth. slightly higher in india but generally much lower than you can find elsewhere in the world. that is a pretty good combination. how linked they are a to the rate cycle in the u.s. is quite an issue. it has always been the case if there is a slowdown in west, that is felt hard elsewhere in the world. that still exists. but perhaps be careful of those with too much exposure to commodities and too much exposure to china. but otherwise try and get exposure there. guy: jonathan, you bring up the u.s. what aim doing here? am i currency hedged or currency unhedged? >> with the u.s. you want to keep the dollar. you look at what are the options elsewhere, the
currencies you might like? the japanese yen are going to do everything they can to try to stop it from rising. so that's one area that is difficult. sterling, really difficult. we're going to have slowdown concerns with brexit. europe is still struggling. you keep the dollar as an asset class that you invest in but perhaps on your equities you look at emerging markets as an area to go underwait rather than u.s. equities. caroline: give us your breakdown of asset allocation at the moment. more rate decisions. you have new zealand, you have mark carney's f.e.c. coming out today. how much is in cash? how much is in stocks and how much is in bonds? >> it depends who i am investing for. i would be overweight cash. i would have 10%.
i would be very underweight gilts and government bonds in general. in fact i have no government bond where is i might traditionally have 10%. equities, i'm pretty close to neutral where i might have 50 in the past, i'm perhaps at 46 at the moment and that is pretty evenly split across the u.s., europe and the rest of the world. i have a good asia and emerging market within that. other asset classes that i have a healthy exposure to, direct real estate, private equity, direct credit is another area for those parts of the poirl. -- poirl. - portfolio. nejra: underweight government bonds. neutral on equities. many thanks for your time today, jonathan bell. next, more brag news that will be splitting up into transport and energy companies. all the details.
or energy will be named. the driving force behind this decision, it was announced the strategic review back on june 23. shares have popped ahead of that. what is the viewpoint 12347 >> i think that for maersk, it is a huge company. but i suppose for investors, you have a giant oil company that is viewed as masquerading as a shipping company or the other way around. this k that by having split you you will have a clearer idea what you're invegasing in. that is the main kind of thinking behind this mover. guy: presumably good news for investors. this is something they are looking for? >> the shares have seemed to indicate that. as i say, you have this giant
oil company and this giant shipping company. a huge market cap. yeah, i think that is the -- that is the driving force and will be a positive for investors. caroline: give us more detail on how the two sides of the business are faring. >> well, the oil story is very well known. we have sub$50 oil. that is difficult for everybody in that space right now. for can takener shipping, there are some signs of improving in container shipping rates. we have seen it but it is still at a pretty low level. it remains to be seen how that is going to do. broadly suffering from overcapacity. there are signs of improvement. it will be interesting to see how that fares and where that leaves the container shipping side of the business. nejra: thank you so much. taking us through that breaking
news on a.p. maersk. caroline? caroline: we know that they have 3 percentage points up, almost 30% since the strategic review was announced back in une. deutchland leading in the stocks 600. miners taking the lead. b.h.p. billiton up 4.4%. the gold miner up 4.5 pblet%. the gold ramped higher after the fed held steady. arcelormittal doing better on the back of rio tinto. not helping the likes of infrastructure and utilities. hsbc one to be looking at as well. down 1.6%. nejra: up next what does a triple defense tell us about the thinking over the world central bank.
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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. nejra: welcome back to "on the move." 30 minutes into your trading day, we're up about .6 on the stoxx 600. nejra will be breaking down some of these individual moves. dax up more than a percentage point. deutsche telefonica is outperforming today on the back of those 02 tariffs. i want to dig into one tax story that is really stealing spotlight. we love it over here at bloomberg. of course it involves apple. seeking to take a stake in ccarron -- mcclarne.
apple has since declined to comment. the iphone maker has been ramping up efforts to disrupt the transport industry. give us what a chance of what mcclairen might offer. why is apple looking into it? >> well, the interesting thing is mcclaren is a big name and a sexy name in the auto industry. it makes cars costing about $200,000. it doesn't seem exactly the market that apple generally goes for. it is upstale but still mass market. they are very ltte. the 1% or the 1% of the 1%. what they have done that is interesting is that mc claren has transitioned from being a
technology company motor acing. it could be that experience in terms of transitioning from a company that didn't sell directly to consumers to a company that sells directly to consumers that makes mcclaren an attractive play for apple. nejra: what does apple sniffing round mc claren and an oddball start like lyft mean for automakers? >> you look at apple's cash position, they have about $232 billion. that would be enough for them to buy daimler, volkswagen and b.m.w. combined. if they put those resources toward the apple industry, it is really going to scare the established players, especially the market players like b.m.w.,
mercedes and audi. that is the type of space that apple goes for. they have been working on this project for sometime. if they are putting money to work to buying automotive manufacturing expertise, that shows they are quite serious. caroline: fascinating the moves in the mobility space. the race is on. thank you very much. always on top of all the aught auto stories here in berlin. i know we're digging back into the fed. uy: let's talk about that. let's talk about what happened with the fed yesterday. clearly a non-decision in so many ways with the detail so important. that level of descent critical and investors paying attention to that. let's listen to what they told us. >> they are obviously not in much of a rush.
be clear about that. their behavior demonstrates that. they are looking at all the other measures of inflation that have been ticking up. it is not the first time ever there have been three dissents but those are pretty rare. a three-dissent vote is very unusual. >> ultimately insteth steady of data dependent, i think they are market dependent. the markets meaning stock markets are high and stable then perhaps we'll see one. if not, then perhaps we won't. no guarantees and a lot of confusing rhetoric. >> the markets have been thinking all along that the pace of tightening was going to be very, very glacial and it is increasingly looking like the market has got it right and the fed was over optimistic. caroline: join us now is head of fx strategy and economists steven barrow. great to have you on the program. i want to start with looking at
the dollar a little bit with a couple of charts on the bloomberg. the reaction by the fed has weighed on the greenback. the trade-weighted dollar, we have seen following a three-year rally. how do you rate this in your outlook for the dollar? >> i'm bearish of the dollar because i think so that the federal reserve will go very slowly on rate hikes as it has done. obviously, you know, if you look back to december and the first rate hike from the fed, i think there was a lot of expectations at that time the interest rate divergeance between what the fed was doing on one side and what other central banks were doing on the other, the e.c.b. and the bank of japan, for instance, there was an expectation that that would lift the dollar. i'm somewhat more cautious and bearish. i didn't think the federal
reserve was going to raise rates the way it was predicting at the time and that has played out and the dollar has slipped back. there has been some degree of interest rate divergeance. it has been fairly limited and i think the dollar will probably continue to trade in this sideways fashion against some currencies, the euro for instance, has been 10 5, 115-type range for a long time. i think when the break of that range comes, it will be to the topside. the euro getting stronger and the dollar getting weaker. guy: it is guy from munich. interesting to see the euro dollar trading at two-year lows now. kuroda didn't get much bang for his buck when it came to the yen. moved back to the 100 level. what is your view on where the yen gos from here and what can the b.o.j. do about it? >> in some senses perhaps the market has interpreted what the bank of japan did incorrectly.
the yen has gotten stronger and the dollar got weaker. at may well continue for the short-term. the essential fixing of the 10-year yield at zero% could be significant going forward because if as the federal reserve raises rates,ing a beit slowly as u.s. bond yields start to move somewhat higher, and the bank of japan keeps that rate on the 10-year yield , that could t rate start to help dollar-generaly back. i don't think this move down towards 100 may be a little bit lower in the short-term may turn into a long-term trend. i think what the bank of japan did is significant even though the market doesn't recognize that. >> we're also seeing the talk of an overshoot in inflation on
my screen at the moment, we're showing how much inflation expectations have collapsed in japan despite negative interest rates. they have not managed to keep them after the sales tax is hiked. how will they help when they couldn't get the inflation to 2%? >> i think you answered it yourself. not at powerful the bank of japan lacks credibility on this inflation target. it has not been helped by external factors that the bank of japan itself recognizes because of low oil prices for instance. i think this overshooting idea was not the most significant thing to come out of the bank of japan at all in the meeting earlier this week. i think much more significance is this decision to essentially try and fix the 10-year yield at 0%. i'm not saying that is necessarily going to be something that is going to help the bank of japan achieve the target but it may be something significant as far as dollar-yen is concerned.
caroline: we have talked about the dollar and dollar-yen this week. after you look further ahead into the months to come and we take into account the e.c.b. and the bank of england as well, what are the key crosses going to be for you and what are you expecting from them? >> i think most of the key crosses outside of the major currencies, if you look at euro-dollar, we have spoken about are pretty stable. dollar-yen has been relatively stable recently. dollar-swiss has been pretty stable. even sterling-dollar. we had the shock of june 24 and the brexit vote but since then it has been relatively stable. things like how the australian dollar are moving, the new zealand dollar. a lot of the emerging markets currencies as well. i think the issue is really whether we'll be in a risk on or off type environment.
obviously the moves from the two central banks are banks this week have helped the risk on environment and helped those in emerging market currency to some extents. in terms of points going forward, i think the fed will raise rates in december. tpwhal a fairly benign move for the market. the obvious problem in the interim is the u.s. election because if that turns out for the markets it will be very bad for risk and then we'll see the dollar much higher on those emerging market crosses. if we don't see a bad outcome i think so it is most likely that the dollar will weaken back. guy: from what i have heard, you're saying i should be selling volatility in the majors. is that something you'd be comfortable doing now? do you worry you could get caught up quite badly on this
walk us through on what you think volatility is going to do. >> i think it will stay low. the issue there really is whether get political disturbances. we talked about the november situation in the u.s. with with respect to the election. there are other risk events coming up as well. some in europe, for instance. the italian referendum. the constitutional reform. there could be a downgrade of portugal into investment status in october. there are some risk events. around those risk eventses, particularly the u.s. election that it is probably a good idea not to be short volatility just in case we get a surprise response. if we see volatility pick up before and after those events and the events prove relatively benign that is an opportunity to see a factor to sell volatility. time not a volatility bull in
general at the moment but taking into account these risks have spiked as we seau the pound around the brexit referendum. > thank you. taking us beautifully from the fed to the bank of japan and emerging markets and the u.s. election, caroline? caroline: around the world in eight minutes rather than 80 days. up next nejra, clearing out. why the global investment banks in london expect the u.k. to lose $570 billion clearing clearing out. ♪
guy: welcome back. you're watching "on the move." we're live from munich. we're live from berlin and london. let's get everybody caught up with what they need to know. >> guy, thank you. maersk said it will split into separate transport and energy companies. announcement comes as denmark's biggest conglomerate concludes a structural review. the chairman first revealed the company was considering splitting up the group on june 3 and dismissed the c.e.o. e.d.f. has cut its profit forecast. they cited safety check s that arekeeping its nuclear power plant shut longer than expected
for the mover. earlier the credit ranking was cut by one level to a-minus. eriksson has said cost cutting plans it announced in 2014 will lead to job cuts worldwide as it responded to local media reports that it may shut down what is left of its domestic production. they cited a copy of a confidential plan it attained. they are considering firing 3,000 employees at its products unit in sweden. nejra? nejra: thank you. the u.k.'s decision three months ago to leave the european union sparked a volatile few days in capital markets from stocks to bonds and currencies. things have settled down since then but big questions remain. the boss of one to have largest financial groups says brexit
makes europe more relevant. he spoke exclusively to bloomberg this morning. > the risk-reward yashio for europe is -- ratio is definitely improving. we are observing a movement of reallocation of assets which is increasing and is making europe more relevant. think about the fact that 71% the brexit decision of the g.d.p. of the european union was produced within the eurozone. after the brexit 86% of the g.d.p. is now produced within the eurozone. it is becoming extremely relevant. nejra: the eurozone extremely relevant. staying with brexit. according to people at four of
they ggest english banks, expect france, germany to prevail over n a fight over the clearing of 570 billion dollars of euro derivatives and are making plans to deal with the fallout. for more, we're joined in berlin by john. john? what is at stake for germany and france? a lot of talking about it. what do they want to gain here? >> they are trying to take a key business. this is a key business for the derivatives market and you know, it is not just -- it is not just the clearing, it is not just the clearinghouse which is a fire wahle wall for derivatives traders. there are legal jobs and i.t. jobs and potentially trading jobs. some estimates have it in the range of thousands of workers. a treaty change for this to actually happen?
>> yeah, that is something that the c.e.o. has talked about. certainly some laws could have to change in some respect. you know the e.c.b. has tried to do this before and osbourne fought back and the u.k. won. there is a path for the european union to take this euro-denominated clearing business back if they choose to target it. it is there. there is a way to do it. >> what are the biggest london banks saying? what is the rest of the industry saying? >> our colleague, gavin finch, did some great reporting. he spoke to executives at big banks. in general, it looks like many of them think that this is going to move and they are making contingency plans for it. they are trying to make sure they have business continuity and they think this could be one of the first things that moves whenever a brexit is eventually triggered there. they are planning for it. there are of course people who
see it the other way. people from the industry who say this is an enormous piece of business. it is not easy to mover. you can't just pick it up and move it easily. a lot of people with a lot at stake with planning for the worst. there is some precedence. it is not a perfect example but you know, derivatives markets, derivatives clearing has moved before between whenever these companies are competing. it certainly seems like it could happen. moved, bond feature almost overnight. you talk about the kind of ancillary businesses built around this, john. talk to me about, london is built on clusters, a series of clusters that work together. if you take that away, what is the ripple effect or the shock wave into those other clusters? >> that is what people are wondering. you know, you want to have as
much close together as possible. you don't really want to do euro clearing in one place and dollar clearing in at and sterling clearing in another place. that's -- i think that is one of the key concerns is perhaps you just choose another domicile to put as much of it as possible for the first quarter sis of it. that does remain to be seen -- for the efficiencies of it. that remains to be seen. once you start to see one big chounching trading or clearing, maybe you begin to see other currencies and other assets begin to move. that is looking pretty far into the future. those are the concerns that executives are looking at. he y question is actually doesn't think frankfurt or paris are up to it. maybe it will be singapore or new york winning out. thank you very much indeed. it is one we have to keep a close on. up next, will curve control come to europe?
i just sort of have given up on trying to determine when they are going to go so to speak. >> that was bill gross speaking about the fed decision. interestingly he also said that the bear market in bonds has been delayed and caroline, if we look at wirp we can see the expectations have changed for the fed. more than a 60% rate hikes coming in december. 61.2 to be precise. caroline: we'll see whether november solidifies it. not only the fed that is envogue today. there are some other key highlights for our viewers. continue the week's central bank theme. the e.c.b.'s mario draghi makes a keynote address in frankfurt. at 6:00 p.m. mark carney right
here in the city i sit in berlin. we'll have policy announcements from south africa, egypt, central banks aplenty today and also maybe beer aplenty. guy johnson in munich just in time for oktoberfest. that is not what drives you, is it? it is a unicredit investor conference. y: i'm going to wrap it up here and walk down to the unicredit event. this is an investor event. people trying to come to terms with how they invest their clients' money in a world where negative rates abound. we have seen a number of global sovereign bonds in negative territory. dipping to around a trillion in the last couple of months. 4 i'm interested to hear
janet yellen resist pressure to hide u.s. rates but-- to hike u.s. rates. a dissent from a 30 member of the committee. stocks and bonds rise around the world as the dollar weekends, european equities have started higher. merck the country's biggest conglomerate is to split in two withone company focused on shipping and the other on oil. welcome to "the pulse" live in