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tv   Countdown  Bloomberg  September 28, 2016 1:00am-2:31am EDT

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anna: deutsche bank denial, the ceo tells excepting government support is out of the question for us and raising capital is not an issue. saudi arabiaise, says it may work with regional rival iran on a future output agreement. plus, we bring you the bloomberg markets's most influential index. interviews and panels, throughout the day. ♪ i very warm welcome to countdown everybody. i am anna edwards. manus: i am manus cranny.
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newsng the deutsche bank into context, type that into the bloomberg right now. what we have done for you, just bear with us. the white line is the size year to default for deutsche bank. this is the cost of a five-year credit swap, five years ago in 2011 at the height of the banking crisis. but the eye of the storm of the banking crisis, the cost of default back in 2011 was extremely explosively higher, where we are with deutsche bank right now. the question is in 2011, as our guest host, will explain a solvency issue and not profitability issue. this is in heart of the banking issue. is the systemic risk> ? makesand that chart things a little less worrying i suppose.
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we saw the respite for deutsche bank in yesterday's trading session. just to highlight what he is been saying overnight capital raising, is currently not an issue, accepting government support is out of the issue. they will hold out overcast worried about u.s. being overblown. that is deutsche bank. manus: the one thing i will say about the amount of trading and credit default on deutsche bank, and racket head additional $3.9 billion outstanding. that is the most actively trading credit support swap out there. there is risk. it is a question is if he can convince the markets that he has control of the situation. anna: the other big story we are covering is the oil story, continuing to bring average from algiers let us show you the risk. again, the saudi iran relationship that is holding the oil markets in its
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grip. no deal by either party today. but remember, that is the latest date we are talking about. manus: we treat you all. palladium, who would've thought anna and i would get excited, but on course of a difficult game since 2010, up 70% on a quarter. if you believe in a global economic recovery, you want to belong on palladium. south african wage negotiations is pumping that higher. anna: the yen is weaker this morning, down by 2/10, or a quarter of a percent against the u.s. dollar. japanese, exports witnessed across the asian .quities se section here is rosalind chin. rosalind: the oil has halted losses on news that saudi arabia may compromise with iran on a future output agreement. the oil minister get the
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strongest indicator yet the kingdom could reach a deal in november however neither country, expects that the meeting of opec in algiers. and that is due out, will be increasing by 3 million barrels. of deutscheecutive bank has dismissed concerns about the finances. in an interview published late yesterday, he said that capital is currently not an issue and accepting government support is out of the question for us. his comments come after shares in germany's largest lender extend a record low in the wake of the u.s. questioning $14 billion to settle a mortgage-backed security crisis. royal bank of scotland $1.1 billion to settle claims it sold faulty securities the u.s. credit unions. the agreement closes the lawsuits filed in 2011 on behalf of of credit unions. according to a statement from the national credit union administration.
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rbs has not admitted fault, and says the successive costs will be mortgage securities, involving the federal housing and justice department's. shimon perez, the architect of israel's defense department who evolved into a tireless advocate for peacemaking has died at age 93. according to those familiar with the situation, he suffered a stroke in tel aviv two weeks ago. the nobel prize laureate was the elder statesman, and the last surviving link to the country's founders. he held all of the top civilian posts in a career that spanned decades. and elon musk has laid out his vision for building a self-sustaining city on mars, and what he calls an interplanetary transport system. the spacex founder says it will recall full rocket reusability while in order. he says a ticket to the red
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planet would initially cost be drivenwhat would down so anyone can afford it. global news 24 hours a day powered by 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . i am rosalind chin. this is bloomberg. anna: thank you very much. manus: juliette saly is standing by. we have dividend action on the topix. slightly, butr so not so in the equity story. juliette: thousand stocks -- manus: a bit of an issue. juliette: trading the dividend is waving on the overall indicator on the nikkei, why we
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are seeing quite a bit of weakness in that market. but elsewhere of course, we have really lost this postpresidential debate euphoria that we had coming through in the region yesterday as well. but if you take japan out of the picture and have a look at the regional index, it is lower. but certainly not to the tune of what we are seeing with a big drop coming through from japanese equities. you see there is buying coming through from consumer services stocks, still getting a boost on the route we saw in u.s. equities in the consumer stocks also, higher but oil and gas underperforming as we continue to see oil fluctuate ahead of that all-important meeting in algiers as well. having a look at the big movers in the region, toshiba the best performer in underperforming market in japan. it is up over 4% in the afternoon session. this is after it doubled the profit outlook as the yen continues to drive sales. hang seng shipping having another solid performance in seoul, on news the south korean
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court is considering a sale of the beleaguered shipping company. and in sydney you have agl energy leading the pack, in an otherwise downward energy market this was as the dividend payout ratio was boosted and share buybacks. having a look at the yen, manus said it has been fluctuating, weaker at the moment. but not giving a boost to japanese equities, holding around the 100.59 against the dollar. anna: juliette saly joining us from hong kong. oil has halted its losses ahead of a formal meeting of opec members and algiers today. expectations of a deal to stabilize the market are low, after iran says it wanted to raise its output. >> it is the time for opec members to exchange views and maybe cook something for the next meeting. >> but is iran ready to freeze production at current levels?
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>> no. >> you do not want to freeze production? >> we are not ready. >> 4 million barrels a day? >> yes. manus: pushed hard by caroline. pushed it mayas compromise with iran on future agreements, saying the deal in november is possible. >> three countries had special conditions, namely libya, nigeria, and iran. and it has been constrained for the respective reasons. and it would be permitting to the terms, to produce at maximum level that makes sense. and generally, they would be the level that we have achieved recently. so, once we agree to this, then a freeze will take place. anna: for more on the oil story, let us get over to yousef gamal el-din in algiers.
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very good morning to you. what can we expect from today? because this is really when we could see developments. the key here is going to be closing the gap between iran and saudi arabia. officials still too far off according to many analysts we have been speaking to. that sound bite you played from the saudi oil minister, achieved recently is the key word. it is a backward looking scenario, and that means that iran would not be able to reach its 4 million barrels per production target. that is of course a challenge that needs to be overcome, and the other issue that we heard from the iranian oil minister yesterday, he said he did not see any proposal from saudi arabia. so, clearly that conversation needs to get some additional traction, as we wait for more news and get closer to 3 p.m. local time, which is when opec and formally meets. now, saudi arabia was still
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positive. i ran we understand want to have a least 12.7% of market share. currently, looking at 10.7%, as it stands. it is bringing those heavyweight fighters at the opec and finding some compromise. manus: compromise is the key word. great work on the ground, yousef gamal el-din in algiers. putting us as the guest host, allen higgins, chief investment officer. alan, i know you like the chart. what we are is looking at. the decision not to cut by the saudis way back in 2014, is the policy or the journey tough for crude? it has not worked. are they are about to capitulate, not that they would frame it in those terms? alan: look at the stabilization this year. supply,ear
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but there is the demand from oil in china, but also globally a commodity that has decent demand. very hard to get oil right, as we know. many people know it hasn't option analogy, they want to get a present in levels before they discuss any freezes. so, be skeptical, understand there is enough cut back in the states and other places, and there is an underlying demand to support oil. and the price, any deal gives you an option. on the upside, we do own a bit of oil related stocks. moment? players at the alan: some people play euro, going along with the noisy kroner. that is the way we play it. anna: some big let suggested there would have to be another letdown for the oil price to enable these voices around the
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table at opec and with russia, too. to your point, demand is coming back, that make it slightly more true perhaps. alan: it does. as we see with central banks or opec crisises, tends to result in agreement, things seem to be going well, but they are struggling in the middle east. $66, iran down. anna: what we have here is another one. alls: this is global msci world in the white tracking oil. i was at the goldman sachs conference. yesterday, one of the oilgnations in my mind, low is already priced in. and that is not going to fall out of a lot of the equations next 12 months.we have a lovely bloomberg piece on the net effect of oil is zero, because
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the investment in the marketplace, in the world has dropped double 1986. conventional wisdom is low oil is good for the conventional economy, but that doesn't happen with equities. we had a risk environment. and people feared that russia, brazil, worried about the falls in russia, you might remember. and it was feared we had some u.s. energy stocks that really bombed out, so that tended to be the largest factories of the broader markets do like the stabilization and oil. they are right. look, a collapse in oil is a risk-off event, definitively for markets. anna: we are not going to revisit his period, asked why priceyal oil depends on what is driving the lack of confidence? and it was a lack of confidence in the man at that point the demand was going higher as well?
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alan: the global economy looks actually ok. pmi in europe and the united states, and china, the fear is that the max on risk-off scenario, the economy has come through. it is not until recently equity markets have been weak. anna: allen higgins, chief investment officer stays with us. here are highlights of your day ahead. manus: mario draghi speaks at the annual research conference. he is due to hold a closed-door meeting with lawmakers, followed by a news conference at 4 p.m. u.k. time. anna: an hour before that, fed chair janet yellen testifies before the house services committee. a lot to catch up on. you can follow some of the developments, follow all of the developments here on bloomberg television. the chairman and
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ceo says ultralow rates are changing the hedge fund landscape. more on that interview, next. nejra: two into the speeches and panels. and this is london's bloomberg market's most influential event. we hear from the credits weeks suisse ceo. this is bloomberg. ♪
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manus: welcome back. just on 1:19 in hong kong. rather soggy, hang seng down. let us in a bloomberg business flash. rosalind chin is with us. rosalind: thanks, manus. the chief executive of deutsche bank has dismissed concerns about finances. in an interview published late yesterday, he says that capital is currently not an issue, and accepting government support is
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out of the question for us. his comments come after the extended losses in a record low, collecting more than $14 billion on mortgage-backed security cases. forfeitrgo ceo is to $41 million of stock and celery, as the board investigates the bogus account scandal. says the's director company is committed to ensuring that all of the business is conducted with integrity, transparency, and oversight. he goes to washington tomorrow the basic grilling by the house financial services committee. the south korean court dealing with hang seng shipping receiver ip, as the central district court has called for a meeting while a volume in the business. move comes after an analyst said yesterday that they have been buying a smaller rival.
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nike shares have fallen in after-hours trading, after the world's largest athletic brand missed analyst estimates, renewing concerns a cannot maintain growth. orders rose just 1% as of last month, and a 5% gain. increased competition from adidas and under armour have taken a tool, with small sales growth. afterin china are flat, the world's biggest ipo since alibaba two years ago. a chinese magazine says that they are among investors. the bank has a market value of about $49.5 million, more than 500 million retail customers, and the most outlets of any business lender. and that is your bloomberg business flash. anna: rosalind chin and hong kong. says hedgeement
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funds are facing the most challenging time he has seen in an investing career spanning several decades. manus: he says that ultralow interest rates and swollen stock market valuations are crimping returns. >> in my opinion, there is going chaos, createdy by the negative and low interest rates. alan hagans is still with us. tell us about the specific aspects of the low interest rate environment on the hedge fund world. why is his grading such concern for hedge fund managers? alan: this guy is a legend in terms of investing, but cash is important to hedge funds. because return starter cash on top, cash rate of, five already up 5%. i don't quiteat
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get is he talked about valuations of equities being higher, but what we are looking for our investors long-short. not long equities, but ideally correlated with equities, so it's equities are high shorting the opportunity, whether that be within the sector. so, it has been a disastrous period for hedge funds and really negative outflow in general, and you see a correlated in the long earnings base. you might recall s&p did a note say 90% of u.s. equity funds are underperforming benchmark, the s&p 500. so are really tough day for active management. manus: the bank of japan came out last month targeting 0% on government bonds, and as we understand it, moving slightly away from more negative rates. what we have here is volatility for you. and volatility drop 171 basis points last week. that is the most since april. my question to you, targeting
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the 10 year government bond in japan would help abe, give the latitude to be fiscally loose. what does that do in terms of japanese equity exposure? because 0% on 10 year government bond yields is not bad. 10 years and zero, you can do whatever you want fiscally. alan: it sounds crazy. half a percent you go, ok. but interestingly, they are struggling to get there, because it is nowhere near zero at the target. i think the idea is for bond geeks to roll down. the bank owns the 10 year at 0, rolls down to even more negative. and you make some money. and they do seem to be listening to the banks, saying this is really painful. do not make yields more negative. but now they are 0, and you will have some stations, say bank of japan as a big seller -- anna: is this what the bank of
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japan wanted? bull, they do not want 10 year yields to go very negative. and they want a curve, like this. if you're watching on tv, it goes like this. [laughter] roll down and banks to make a little bit of money. that is how i see it. anna: and will they be successful in controlling the steepness of that curve? alan: i believe thought about the swiss franc, very successful, then break. well, a bit different because the swiss franc had some external effects. and japan is very internal. but still, let us see it. they haven't gone anywhere near zero. i think -.1 at the moment. negative. are by the way, the producer is vogyg that alan higgins is
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uing. alan: nice and early. [laughter] ecb ine talked about the our next conversation, but how do you interpret the bank of japan and the negative rates story? alan: banks matter. as simple as that. and the transmission mechanism, it seems to be that bank equities are so depressed, it seems to depress lending. so there is an effect on bank equity, to whether the willingness to lend -- anna: going more negative, or are we done with that? alan: well, we have seen, from mario draghi, i think we think the bank of england, the reason the bank of england is going to be rising rates -- anna: we will talk about that in a little while. alan: i think they are virtually
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done on negative rates. anna: allen higgins stays with us. mario willext, super need a top performance when he meets the germans in berlin today. this is bloomberg. ♪ ♪
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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. anna: welcome back. this is countdown. 6:30 in london. dollar against the yen, we show you the lights of tokyo. we have the yen a little bit weaker this morning against the u.s. dollar. and if you daybreak is now available on the bloomberg and your mobile. let us take a look at the stories that made it in this morning's edition. the price of oil is there. manus: the saudis need a deal. up $45. the iranians, i love caroline, she just battered the iranian oil. the stoic lot. but really, are you prepared to go that low? anna: output for november into
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the is billion to pay $1.1 settle national credit union administration claims that it sold fault judge mortgage-backed securities. but the dispute involves the federal housing finance agency. focusesinally, daybreak on the bank of china. there you go. they know how to do an ipo opening in china. more pizzazz. but that is the state of play. anna: the three best story this morning. u.s. consumer confidence rose to the highest levels since august 2007. guy johnson joins us with a chart of the hour. alan higgins still joins us. guy: fairly straightforward chart, and to be honest we were just discussing this during the break, today feels more positive than the markets seem to reflect it being this morning.
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this is a bit of the u.s. economy, a bit of the global economy which is working. and it is actually working quite strongly, so we are back at levels we lost before the last session. u.s. consumers getting further into gear, quite possibly in the jobs market. looking to spend money. and if this continues, than i would say the work price of 49.9 this morning. this is the interest rate probability that is delivered by the bloomberg, telling you whether the fed will raise rates in december. it may start to move a little bit. bit i don'tis a understand. consumer confidence, stanley fischer on the table last night, again invoking his view that wages are beginning to respond to the labor market. and still the probability drops. anna: a look into asian equities in the wake of this morning, you can understand that people interpreted that strong u.s.
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data as a high probability of a rate hike, but the action is the reverse. the last week and has been coming down. alan, what are your expectations around interest rates now? not aecember now, that is certainty. alan: i think you are right. i think we have a mini cycle of wage increases. consumers are in a good place, as we can see here. and no sign a recession. and they are data dependent, but also market dependent. the markets are well behaved. they will deliver a rate hike. manus: the goldman sachs conference, the only overweight position may have a moment's cash, a number of institutions. blackrock warning, goldman is overweight cash. how does all of this confidence play out, in terms of positioning? do you still want to be overweight u.s. versus the rest of the market?
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alan: not necessarily overweight u.s. we think with the u.s. we are holding. so we want a full equity weight, but mostly overweight cash on fixed income. so, it amuses me that people -- guy: there were devout fixed soome, without liquid access they have cash on the other end of the portfolio? alan: i think that is exactly right. there was some high-yield, less so now, and we will have a bit of that. but all this cash in my mind is not equity money. anna: guy, thank you very much. alan stays with us. getting some breaking news coming to the retail sector, specifically around walmart. walmart is in talks to invest in india. giving you background on this, advanced discussion to advance that money in the online services. as the companies battle and e-commerce,
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according to a person familiar with the matter. manus: the largest online retailer. going head-to-head, the largest online retailer in india. but the leader has been under assault, taking investments in the company. and it is fascinating to see the amount of money that is being cloud into these areas. s says he jeff bezo plans to spend $3 billion in india to gain customers in this fast-growing market. clearly, a lot of competition in the market. manus: go, india. anna: mario draghi meets german lawmakers in berlin today. he is set to reiterate his message that governments must increase fiscal support to boost demand. manus: joining us to discuss this, it is caroline hyde joining us from berlin. a very good day to you. germany,ghi goes to
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i'm fascinated to know what kind of reception he will get? the finance minister almost chooses him of being behind the rise of alternative political parties? caroline: the afd, he says wolfgang almost laying it at mario draghi's door, saying very low interest rates have been a push forward for populism. i think we have nine hours time. unfortunately, it is a closed-door meeting. between mario draghi and the german lawmakers, but gloves will come off. he has 90 minutes of discussion, nobody knows. specificallyold us that we will put a range of political questions, key to them? we know the germans are one of the most opposed to mario draghi' negative interest ratess, bond buying, perhaps they feel that italy, spain, these countries that run up to
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much debt are able to get off the hook, able to push back. and the overall reforms. negative interest rates are hurting banks. look at deutsche bank. all of this is where mario draghi comes in and says yeah, you have a budget surplus. i know you do not like it. but you got it. start spending it. anna: caroline, you referenced deutsche bank. that looms large. mario draghi has been critical of what he calls a crowded sector, many people talking about germany being overbanked. is that a topic of discussion? one assumes so? caroline: it is front and center in the political base in germany, and indeed across the press, word about the strength of the keybank. the biggest investment in all of europe. he is talking in front of the european parliament, saying
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consolidation, time to start getting your cost to income better. this was really notable. he said the cost to income ratio among some euro area banks are higher than in others. check out some day to the bloomberg has been looking at. who is the least efficient country when it comes to banking across the eurozone, 2015? germany. 73 euros they have to spend to make 100 euros. that is a 73% cost to income ratio. much worse than the likes of spain even, which is just over 40% haired much worse than the likes of latvia, estonia. start to get your cart and year, , what he is likely to say looking at deutsche bank.and commerzbank is laying off thousands of employees.not a pretty time for the banks in germany. manus: caroline hyde with a very latest on mario draghi's mission to germany. alan higgins's chief investment
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officer at coutts. at 6 a.m. this morning, we showed this chart. anna: what was your idea. manus: it was your idea. alan: i never said 6:00 a.m. we can pull up this. this is the deutsche bank right in 2011.-year back this is the basis of 2011, the eye of the summer storm, taking hits and punches over their losses on great sovereign debt. and it was a question of sovereignty, not probability. what do i take away from this? in terms of default cost? alan: manus, i think you are right. it was the sad poster child of the 2011 crisis when the greek banks spiked on 50 basis points.
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remember,i clearly not much probability. this era is not quite solvency yet. deutsche bank shares and others are really troubled, it is a probability issue. and back in february, we saw the tender somee bank of the bond. they did not buy that many. 5nus: they were about billion, ending of a 760 million. it is amazing that that loss, the important ones disappear. tender fromybe a bonds to restore a bit of confidence might be in order. but the main message for now is an equity price issue, not a financial bond price issue. anna: this is nothing overly worry about, nothing systemic? 2011, whenot like
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you have the poster child for very distressed credit. we are not quite there yet. but 250 is big. anna: as we showed a chart caroline was talking about, the low probability levels of german banks, underlining the lack of efficiency in german banks, just another suggestion we need consolidation. where is that going to come from? alan: it is tougher germany. i cannot even -- a german apology -- so many banks that do not have a profit motive. so, it is interesting. a very successful economy, clearly. but that is one area where they struggle. manus: by the way, this is the marketplace. five-year senior debt. there is a differential. the contagion is there. deutsche bank down 53%. and the italians are getting trumped more than the germans. would you buy any financials? alan: financial debt, yes.
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we own quite a lot of financial debt, definitely taking the view this is not solvency, and you are well compensated for being both senior and subordinated debt. we have quite a large position. remember the storm in february? we bought some in february and more quite recently. we will see. anna: in europe? alan: these are global portfolios, but you do tend to see a lot of european issuance.there is u.s. issuance that comes slightly differently, more preferred, but it does tend to be your. national champion bank is the way to go. anna: alan higgins stays with us. let us about the u.k. the ceo of the largest debt investor, of tree capital, says they are at maximum uncertainty after brexit. manus: manus speaking to winthrop markets, jay
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says there is a lot of watch and waiting. brexit, i think we are at the point of almost maximum uncertainty for all of us, including oak tree and investors around the world, investors in asia. the fact is we just do not know how the actual negotiations for the exit are going to turn out, what is going to happen to the existing passporting, particularly the role that allow conical europeans to move in and out of the u.k. will work. right now, a lot of watchful waiting. in terms of investing, i'm guessing that many businesses, oaktree included, are probably deferring decisions to invest in businesses, to invest in putting more businesses in the region, until we know what is happening. but i am not sure that means we are investing more elsewhere around the world. the fact that something is the late in the eurozone or the u.k. does not mean that something is any more or less attractive
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elsewhere in the globe, asia, latin america, the middle east, or the united states. still with us.ns let us get your thoughtson the u.k. clearly, many investors concerned, understandably because you have a lack of direction. you said something i want to pick up on. use said the next interest rate move the bank having that might be up, why and when? alan: wehn is difficult. the point is a donated cut. looking at conception side, growing at 6% year on year. sainsbury's result which is a bellwether coming up see how they understand it. so we think it will be definitely around a cut, because you see the damage to pension funds, notwithstanding the crazy calculation to use long-term gilt yields for
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liability. that is where the system works. but already seen one case of a company cut a dividend and become more risk-averse because of pension deficit, so why make the pension deficit worse? anna: as long as the consumer holds up, cutting interest rates is the wrong way to protect the u.k. economy? alan: exactly. unless we have a real sharp decline in manufacturing. obviously, post-brexit we had the initial surveys the default, but it is they live. we will have a rocky ride. we have various politicians saying various things about brexit, and will have a very bad brexit week. manus: mr. carney, the governor of the bank of england, talking about scotland and confident it will be adjusting well. also saying that the english economy, there is a positive long-term prospect for the u.k. -- excuse me the u.k. economy. 250.s talk about the in my being unfair to mr.
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carney? [laughter] bloomberg me now. i am on chat. the pound was down, 250 was trashed, commercial property was battered. you are rather moderately optimistic on the 250. is it the domestic play? not brexit levels. 250: three main locations, there about 14%. property funds about 14%, sterling down 14%. sterling is back, but if you buy into the scenario that the u.k. will come through, 250 is still an interesting place to invest. but sterling, the portfolio what we are doing the most, going against the crowd and buying a bit of sterling. cutting back -- manus: euro sterling of cable? dollar,erling yen, everywhere building it up. also, you have a nice impact.
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we know it is a very short sterling, a short run story there. now, and look like it was working. and we had a rocky brexit week. that is kind of the nature of this kind of trade, but what the economy -- if you look at the atlanta fed, forecasting the u.k., looking at that as a predictor of sterling it would indicate sterling strength,. so, we are longer-term, maybe some short run to build up sterling exposure. anna: and they have the annual conference next week, in terms of brexit news flow, make sure that is on your calendar. alan: another bad brexit week. manus: a good value, not sterling. anna: are you making the assumption then that the consumer can be kept away from this, and if the consumer is kept away it is not the back of u.k. economy? because if businesses are nervous about investing in the future, some of them but not all of them unless we actually see,
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job losses and that having an impact on the consumer, you think things are ok? alan: exactly right. consumption dominates the u.k. economy, as it does in the u.s. of course. and therefore, industry are to have a recession retail sales are up year-over-year. so, yeah, we think the u.k. economy will hold.we'll rbc investment banks increased gdp forecast for the u.k.. so -- manus: if we understand to be hard - - alan: it is what be really tough. we know that. i saw a good article that theresa may needs a new minister to contradict the various brexit ministers we have. so, we will see. it is rocky, but there is now you as well. sterling is down 14%, 2 has recovered. 50 anna: people doing a good job of doing those brexiters in their boxes. thank you very much.
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[laughter] be quiet. alan hagans stay for the. manus: up next on countdown, could be more supermarket lower pricing, affecting fourth-quarter sales figures? we take a look at the release. anna: tune in for speeches throughout the day from london bloomberg's market focus of them. we will hear from ubs, credit suisse, and vitol. this is bloomberg. ♪
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anna: welcome back. this is countdown. 1:52 in london. now, the u.k. supermarket sainsbury's reports second-quarter sales of the top of the hour. manus, try to bring up relatives chart.
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weaker sales in the same. period, but acquisition of home retail group. manus: we are joined by the man behind it, senior food analyst at bloomberg intelligence. alan higgins has been with is the past hour from coutts. charles, they have a new policy at sainsbury every day. low pricing. going to hit the numbers. charles: yakima more aggressive than anyone else in getting rid of these multi-buyer promotions. three pounds, instead of 70 pence each. and 60 for the younger. manus: i like that. charles: this means that sales are down for the same period. anna: is that a bad decision? charles: generally speaking, aldi does not do multi-buys. di, orcheaper at al
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sainsbury? anna: we have cool discounter. aldi not growing. sales growth not quite what it was. still a big presence, but how optimistic it's to grow? charles: it will inevitably slow. because if you have 3 billion business and double it is 6 billion business, it is more difficult to get another 20% on that. but is actually money terms, if aldi sales increase was not as great as the year before, i think it was just under a billion pounds added in the u.k. and ireland, as opposed to the 1.2 billion or something. es, definitely slowing. manus: alan, u.k. dropping my 9/10 of 1%, but nothing demolition derby taking place in
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german retail sales. retailers, do you love them? do you like the u.k.? what is your take? alan: we do own bonds from some of these. you have to work hard to get interesting income streams, the likes of sainsbury, tesco. rated of course. it seems in a good place. a difficult sector of course. but that -9% is standard, roughly? i would be expecting a bit better, given what we are seeing in official u.k. retail consumption data. anna: how do you rate the u.k. consumer climate at the moment? charles, looking at the clothing retailers, getting messaging about how consumers have changed priorities, compared to what they were. we heard from a number of retailers talk about how we want to spend money on food and holidays, not clothing for
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example. how was retail space holding up for you? august pockets. one the other things we have written about, consumers are very adept at anticipating price rises. and and you saw the real, real strength with a lot of niche products. watchesand going up. champagne up 30% in august. you can either it to be that to celebrate in gold, for people know the price is going to go up 10-15 points. i think that we have seen before vat rises, we saw that in russia, you get this bounce in sales just before the price rises. and i think we might hear from sainsbury today. certain categories like this have been very strong, but overall weaker. you forarles, thank
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your analysis. senior food and was. alan higgins, chief investment officer at coutts. manus: does anna stock up on champagne? we will go to cyprus. the head of the bank of cyprus joins us, next. ♪
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manus: crew governments. saudi arabia may work with iran on a feature -- a future agreement. we bring you the most influential events, interviews and speeches and panels throughout the day. ♪ you are welcome to "countdown."
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the holidayround travel. they are underlying -- they have reached their underlying ebit done -- ebitda. some revenue and bookings up 1% and revenue for the winter up 11 cents. a conversation we were having with charles. what people are interested in spending their money on. the clothing retailers are loaning the fact we want to spend money on food and holidays. clothing at the moment. positive statement on the back
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of what we had from thomas could. they talked about in encouraging start to bookings over the summer. positive noises coming out of the u.k. travel sector. have second-quarter numbers, retail sales excluding fuel so retail sales excluding .4 of 1%. that is for the second quarter, like for like sales. down 1.1%. i had a market estimate down 1%. this newinvoking pricing policy which is everyday low pricing which is expected to head into these numbers eliminating those multi-buying programs that are going on out there. we had that discussion with charles annan -- alan. down andlike sales retail sales down .4 of 1%.
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the --nterest rates in he says it is hard to have a recession if you have retail sales growing 6% year on year. there is a lot we do not know. let's have a look at the futures and what they tell us. the asian session quite lackluster. of news out of japan. europe will turn a corner and go a little higher. draghiyou have mario going to berlin. , with the --bank and capital is not a concern. those are the big market teams that are out there. you have seen a little bit of a bid to this futures.
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anna: that is very in focus as we are in the ground, getting all that news flow from this energy ministers. iran and saudi seem to be on different pages. they're not talking about a deal being possible. the nymex crude price -- crude prices of. palladium up by .2 of 1%. also used in cars. the biggest quarter for this. see the bond boards. consumer confidence is pumping away. that this mayw is rise. and dropping from 60% last week and 2 -- down to 49.9%. chair on thedeputy federal reserve on the fomc
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talking about wages coming through. you have less than a 50% probability to see a. one or two more lines coming through. the market remaining incredibly competitive. well-positioned to navigate what they call a changing market. the effective evaluation is down on the trade weighted basis. they are saying the effect is unclear this far. anna: let's get more news. >> saudi arabia may compromise with iran on a future output agreement. the oil minister gave the strongest indication the kingdom could reach a deal in november. neither expects -- government .ata is due out
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inventories increased by 3 million barrels. of deutscheecutive bank has dismissed concerns about the bank's finances. in an interview he told the newspaper bild that capital is not an issue and accepting government support is out of the question. they extended losses to a record low in the wake of the u.s. requesting $14 billion to reach a mortgage act securities case. of scotland will pay $1.1 billion to settle claims it sold faulty mortgage backed securities to u.s. credit unions. was filed on behalf of to corporate credit unions. rba has not admitted fault and said the settlement was covered by provisions. the company faces mortgage security disputes and putting the u.s. justice department.
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and partners are in discussion about leaving the bank. a -- asia pacific banking solutions and is planning to depart the bank after 15 years and michael smith is in talks about leaving. a spokesman for goldman sachs declined to comment. they could not be reached for comment. and the architect of israel's defense establishment that evolved into a tireless advocate has died. he suffered a stroke having entered hospital in tel aviv two weeks ago. he was the elder statesman of israeli politics and the last surviving link to the country's founders. he held all of the top posts in a career that spanned more than six decades. global news to for hours a day andiled by 200 journalists
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analysts. this is bloomberg. manus: thank you. the equity market does not ticket that will. biannual event in japan as we round out this quarter, paying out dividends more than 1000 companies listed on the overall topix. 1.3%.kkei closing down by the end has been fluctuating. not the flight to safety we have seen in recent sessions but we did see a little weakness coming through in these japanese equity markets as we saw more than half the market go ex dividend. to shiva by 5%. profit than doubled its outlook. elsewhere we saw quite a bit of
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weakness coming through from those financial stocks. .he hang seng off by .6 of 1% in hong kong we are seeing some good movement coming through from casino stocks. weighted stocks leading the charge. in australia we have closed flat .espite a choppy session new zealand also closing higher. a bit of a mixed picture but we did see weakness coming through asian equity markets. postpresidential debate euphoria is certainly easing. anna: thank you. secretarybetween the general and turkey reinvigorated hopes for a reunification deal. they see a 55% chance of a deal being reached by the end of this year. manus: cyprus has been divided since 1974.
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peace talks were relaunched in may. the bank of cyprus was one of the casualties of the nation's financial crisis being forced to bail and depositors area this in a bid to recapitalize. three years on their planning a listing on the london stock exchange. it is on track to fully repay its funding by the and of 2017. now, the ceo of the bank of cyprus. thanks for coming to speak to us this morning. it must seem like much has happened in the last two years on the cyprus story and the story around your bank. how are things doing, how have ?hings improved guest: we started with a significant cardiac arrest in cyprus. we were to the tune of more than 11 billion on emergency funding on on thetral bank which is
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order of 70% of gdp. we have repaid more than 10 billion of that so we are down from 1.3 deal yen from 1.4. we have delivered by 11 and a quarter in each of the quarters and we think the bank is positioned in a much more healthy space. has been recapitalized by investors. we have taken the capital controls away. we think the bank is ready to go to a phase of growth and rehabilitation rather than just pure repair. there is a lot of for care to you. -- repair to do. ares: nonperforming loans what most analysts talk about. update the market if you can on your nonperforming loans, where are fareed: you on the numbers and had to? your numbers? thet: let's look at
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delinquency and let's see what has been happening. we have been producing delicacies by a billion and a quarter. 700 billion and 600 billion before that. a test today it is 44%. provisions atby 54%. you have a strong level of therage on the component of book that is doing quite and the bit that is not covered is more than 100% covered by the discounted value of the property. is the delinquency coming down, it is a because property is looking more stable, what explains that better picture or are you getting rid of those bad debts? comingall you get that through in a leveraged way. tourist spending is up 12%. tourists are spending less.
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government is proposing 2.7. there is a lot of underlying strength in this physics of the economy. new car registration is up and consumer confidence are covering, businesses are starting to reinvest. significant reform in the government's agenda, there are a lot of positives from a structural perspective all the way through in the manifest in the banking sector. manus: is that coming through in your lending numbers? you must be lending again. guest: we have went 500 million. borrowple that want to in the immediate aftermath of a recession are those you do not necessarily want to lend to. we don't want to be lending equity. we want to be lending bank lending. we have been judicious on how we go about standing -- changing the lending standards.
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we are starting to see an acceleration month on month and in the new lending that we are willing to do and that is important because you do not power and economy with credit. it cannot recover. the investments grade rating and what difference would that make? by how welle capped performs.ign there would take my hat off to the government in particular, the finance minister for having seriously good control and rains and how they reorganize the economy. we would like to see cyprus come back to an investment grade and we think that will happen. it has been notching up nicely during the course of the last year and where allowing it up. what i like to have an investment grade, absolutely. is predicated on getting an investment grade rating but it
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is somewhat off. manus: can you give an update, you are here for the bank of america, merrill lynch conference. you are in front of a lot of investors. this is a moment am a is net? guest: we raised one billion euros in 2014 which was the largest ever investment in cyprus and the history of the state, 6% of gdp. said wet in, we always needed to move the listing to a interest of an exchange. we chose the london stock exchange, we think it is a high standard of corporate governance in the world. we think that law and the governments way that we run our bank is somewhere to that of the u.k. and adding all that together means it is right to put it in london. anna: thank you very much. "countdown."us on
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manus: markets are low after iran said it wanted to raise its arabiadespite saudi signaling it was ready to compromise on a furniture -- future agreement. -- as soon as possible and nobody understands that there is the need for markets -- everybody understands that there is the need for markets so everyone is in favor of propping up the market and [inaudible] manus: he gave his take on the options. ezes at current levels are still high. there have been some arguments
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when you have a willing partnership, [indiscernible] and you have to cut. much -- have much impact on prices. yousef, what can we expect if the saudis and iranians do not seem to agree? an uphill battle. 33.7 millionng barrels they in august and those are record levels. you're dealing with a non-opec supply that has proved markedly resilient in the lower oil price environment that we have been. i have spoken to quite a few over the last 24 hours
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and there is a sense of exceptionalism here. it is always the mind, why do we have to cut back? we are going through certain circumstances, we should be granted an exception from the freeze or even a cut in the case of the angola minister who said there might be other measures they need to look at beyond a supply freeze. you pointed out the nigerian oil minister, similar lines of thought thinking what is the next step and how can we get there? we are waiting to hear from the iraqi oil minister going into this meeting. they said they were entitled to half a million barrels in additional supply. that is going to make any agreement or consensus extremely complicated because each of these individual countries, they have their budget requirements and they are driven by self-interest and that is what citigroup analysts are bringing back home in their latest note. they are saying that the disparity that is growing is likely to see the talks fail and
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they are adding that none of the current scenario seem plausible and the widening gulf between sauditions, iran and arabia means a deal is still some way off. we heard from goldman sachs that oversupply, that glad extending, worsening and that is where they cut their forecast to $43 a barrel for the fourth quarter. the stakes are higher, the macro picture is a lot more challenging. there is a lot of work to do as you wait for that meeting that will take lace at 3 p.m. local time which is 3:00 p.m. london. manus: very briefly, you have 40 seconds to my give me a sense on caroline practically badgered the poor iranian oil minister. is there a deal to be done in november but rhetoric today? yousef: exactly. what is happening for the most
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part, this is all about laying the groundwork for an agreement later on in november. we did speak to one of the leaders at 80 a securities, one of the fund managers and he said there in mind that there are political issues at stake here. not just this they can come to an agreement in terms of what makes sense for the market. there is also the ongoing political difficulties with the strained relationship between the countries. that could cloud or delete and agreement beyond november. anna: hedge funds are facing the most challenging time he has seen in a investing career spanning decades. returns are being crimped for managers. >> there is going to be thetually chaos created by
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negative and low interest rates. us, the ceo ofh the bank of cyprus. the negativeout interest-rate environment. we heard about the hedge fund industry complaining, have you been putting your case to the ecb might have you been complaining about negative interest-rate? >> we are a sub ingress -- where we arenk paying depositors to have their money with us and to charge reasonably large spreads in terms of the risk we take. we have not yet hit the periphery in the way in which it hit the core. it will come. the excessive liquidity and the inability to place it in much of europe is causing pressures on banking models. if you can't pay less than zero to a depositor you have to carry that in your margins which pressures your cost income ratio and you talked about it earlier,
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that puts pressure on your ability to make profits and on your capital raises. there are significant pressures and that drives us to were the questions of whether banks can survive and whether we need consolidation. manus: banks are down 25% this year. the italian banks are getting pummeled. consolidation, will it be forced through by regulators? guest: regulators need to stand out of the way of consolidation. market -- a lot of the banks go bust nationally and they are regulated across 18 member states. what we have to make sure is that we can have something which -- a resolution that works from perspective.ional
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you have to structure and in terms of having the model work by reducing leverage. all that pressure is whether a banking model can work in its contract -- construct. we have to encourage it rather than stand in the way. anna: there are parts of the european banking sphere you look at and we -- they we need to see consolidation. guest: germany has a competitive banking market. look at all markets across europe. they are suffering the same issue which i think we are andng too many banks generally not having enough room for consolidation because consolidation requires risk-taking and risk-taking from a managerial and supervisory perspective is sort of off the cards. manus: when you look at there is on one bank story in town, it is such a bank.
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credit default swaps are rising and the ceo telling bild that capital is not an issue. when you look at deutsche bank, is it a personification of the banking challenge for -- the challenge for banking? guest: that is a reasonable characterization. i am not an expert but when you have reduced leverage, when you have all of the changes in rules about what you can do and how properly you can do it, when you have a significant derivative book, when you have the challenges that all the banking markets face, a manifest themselves in a big universal banks such as deutsche bank. it is the one remaining significant large universal bank on the continent. it is showing all the signs and strains that have occurred because of the last 10 years of
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changes in regulation, changes in liquidity, changes in fiscal policy and leverage and that is coming to rest now. anna: mario draghi wants to hand over the baton of attempts to stimulate the eurozone economy from monetary policy to fiscal action. he wants the germans to do more with the fiscal budget. is that think -- is that something you think the economy needs now, does germany need to spend more to boost the economy? guest: across all the -- this has stopped the world not growing. it is only barely growing. when you are at zero there is nowhere else you can go other his marrying monetary and -- fiscal policy. little place to go. manus: can i ask your view on negative rates in europe, you're likely to be members, what would
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you call on mario draghi to do with rates? guest: i think he has 10 what he can do given that he has the super-national role. the bond bank -- buying programs and the nature in which monetary stimulus can occur is happening nationally and it needs to be joined up with the fiscal agenda of the national and components of the european union. he has gone as far as he can go. we have joined up that fiscal stimulus. anna: you do not think rates will go lower. guest: i do not think taking rates lower is sensible. anna: thank you again. "countdowt is it from n." "on the move" is next.
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to not for the interviews, it is an action-packed day at bloomberg. anna: the market event kicks off in london. this is bloomberg. ♪
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♪ >> welcome to quote on the move." this is what we are watching. rbs is slapped with a fine. when will the bad news for the banks and -- end? we will speak to the ubs chairman about deutsche bank,


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