Skip to main content

tv   Countdown  Bloomberg  January 19, 2015 1:00am-3:01am EST

1:00 am
♪ >> china stocks plunge, and concern authorities are trying to curb the use of foreign money to buy stock. >> an exclusive bloomberg poll of economists point to a move this week against inflation quantitative easing. >> can there be a takeover target for billionaire li ka-shing? >> and a car sharing company seeing 50,000 new jobs in the
1:01 am
euro zone, where they stake their claim to rapid expansion on the continent. hello. welcome to "countdown." i am mark barton. >> and i am an edwards. >> and i am manus cranny. >> 6:30 here in london, a guest will join us. >> and we have a chinese theme. it has been a torrid day, the shanghai composite falling by more than 6% today, and the reason is the suspension of three firms. they are controlling margin investing due to a concern that a recent stern show -- search in
1:02 am
stock prices could have a negative effect. cutting back on the brokerages is -- their money. >> that is right. they are trying to curb people from buying into this rally this ultra bull rally, and it was up 60% last year until today's fall. we are talking 290 billion dollars of market cap has just been wiped out in just one day not a great day in the shanghai composite. it is the steepest drop, the most in five years again after the three biggest brokerages were stopped from adding more margin trading accounts, and they were suspended for three months, and we are seeing those brokerages tanking as well, and h shares in hong kong tumbling
1:03 am
as much as 4%, and they say you cannot borrow money to invest in this, which is what we have seen quite a lot of people doing. this is about 100 74 billion u.s. dollars as of last week. we also saw nine other brokerages were also penalized for various reasons, as well and the big question is why. are they trying to cool down this rally or trying to control the lot of the land, making sure people play by the rules, but they did raise the minimum. >> clearly, this is taking a while for the markets to digest. let's talk about tomorrow because we are going to get gdp figures tomorrow. what are we expecting? >> yes we're are going to be
1:04 am
watching this ready carefully. china gdp growth probably weakened in the october to december quarter according to economists surveyed by bloomberg, and and that is lately lower than the growth we saw earlier, and we also did get the robbery prices, and 67 out of 70 cities saw that new home prices fell. a slight improvement from november, where they saw 67 cities fall. a slight improvement. i apologize for that. if we are seeing a rebound. some suggest we could be hitting a bottom of this market. >> thank you very much, joining us from hong kong. >> one of the other major stories that is going to dominate the theme the route be
1:05 am
week is mario draghi and the ecb. after months of speculation and political debate, the european central bank president is talking about the expansion of the bank system. >> 93% of those responding to the bloomberg survey expect the easing to include purchasing about 550 billion euros worth. >> and hoping that singapore will divide and enough stimulus to steer them away from deflation, and the announcement from mario draghi is supposed to be expected after they meet on thursday, so his big week as we said in the introduction, 550 billion euros seems to be the consensus of economists we surveyed. what will they do if they choose to buy on a month by month basis? economists say monthly buying could determine for a predetermined amount of time
1:06 am
getting back to their goal at just below 2%, and of course, the other big question is what is he going to buy, and a majority think he will buy government bonds. will it be majority government bonds, and other types of bonds, like or print bonds, and 57% say that, and one quarter believe it will be a broad mix of sovereign and others, and other say it would just be sovereign bonds, so how much, how long, and what those are the three questions. >> and how much risksharing could be a key factor. how much is each country going to be on the hook for other country debt. this will be raised by the central bank governors, saying that the decision to share risk is one for elected politicians and should not be taken by the ecb. i am also really interested to see how the germans play this.
1:07 am
does the ecb managed to forge something that the germans can agree to, or are they still an outlier? >> there is no margin. it was said there are all of these profiles on mario draghi that his father was very germanic, and you have got to love it. you can talk about where they are going to buy it, but the mario draghi program started already with the asset back securities program. they bought 1.8 billion euros worth of asset backed securities. at this pace, at that pace, at 1.8 william, it would take them eight years to get to the point of the trillion euros. why? because it takes five days for officials to say there you go and there you go. so can you imagine, can you imagine the adjustable issues of
1:08 am
morality be central banks of europe monitoring what they are doing, and giving them the ability to do as they say they're going to do? so i think it is a logistical nightmare, and the euro is but 1% away from an 11-year low, and with the swish national bank -- swiss national bank, julian barnes did not make any losses after the move and they made no losses in the two days after, abandoning the cap and that they would implement measures to defend profitability, and they say new negative impact on their capital ratios, and, course, the impact is something we will be looking at in detail with caroline as we go through the rest of the day. we bring you the latest from the ecb as it happens, including live coverage over the rate
1:09 am
decision, and mario draghi announcing qe and 12:45 u.k. time. >> now, 50,000 new jobs in europe alone, and that is what uber sees, the ridesharing company. they were at the design conference in munich, and hans nichols joins us now from there. good morning. >> good morning. that is a big number from the ceo of number, but there is one theme that is shaping up at the conference in munich, and that is the tech company, the innovators against the regulators, and you have all of the tech companies in munich and they are wondering how to satisfy regulators in berlin and crucially in brussels, and what you saw was an attempt to take this a little bit less antagonistic, and what he made is a big promise for jobs in an
1:10 am
economy that desperately needs them. >> we want to make 2015 the year where we establish a new you -- new partnership with eu cities where we push for progressive regulations that allow for innovation and help to build the smart cities of tomorrow, some of which i outlined. core partnerships with technology, and we provide massive economic benefit to cities and their economies. what does this mean at the end of 2015? it means if we can make these partnerships happen we create 50,000 new eu jobs. >> that is clearly an offensive from the ceo of uber, saying they want to work with regulators. he made a point of saying that not all laws are bad. this is not just about uber. big tech deals, and what is
1:11 am
happening out there in the m&a space, and some were talking about $23 billion. >> it looks like we have some problems with our link, but he had basically gone to the end of what he was saying, so thank you, hans nichols. >> let's talk telecom, and one story that we are following is buying a u.k. wireless unit from telefonica, and people familiar with the matter tell bloomberg a plan is added early stage and that no deal is imminent, but the sunday times reported yesterday that the company owned by li ka-shing could pay as much as 9 billion for them. >> and we have great coverage lined up in the world economic forum in dollars this week. -- in dell law -- in doha this
1:12 am
week. 97% say we will see quantitative easing, so that will be fascinating. >> join us on twitter. time to wake up to what is going on. we will get ahead of the curve. i am manus cranny. tell us what you think, tell us what is on your mind. 93%, and what do the other 7% say? >> some said there would be qe3. huge expectations. now, coming up, is the misery over four eurostar? the lori fire that closed the service for most of saturday. that is next on "countdown." ♪
1:13 am
1:14 am
1:15 am
>> time for today's travel news and could the problems four eurostar be over? they plan to operate at full schedule after they were dealing with a lorry fire and a british infrastructure specialist could announce an initial public offering as early as today, validly the company at one billion pounds, and they have a
1:16 am
diverse range of projects including a stadium in australia, highways in the united states, and windfarms in europe, and an italian company is pairing up its budget after the swiss national bank unexpectedly removed the cap on the frank, and they will meet with company managers today to review everything from the size of stores to pricing in an exclusive interview at the land of man's fashion week in milan. this was in light of the swiss national bank's move. >> it came very unexpected and i think it is going to be disruptive. we have a part of our production in switzerland, so that is of a concern, because our costs are
1:17 am
going to go up, and considering this industry and tourism, we will suffer. >> the same with all things, and with a look at the currency markets, let's bring in a senior fx strategist. i am looking at the euro/swiss. the trade more or less at parity as we speak. you said, ironically, the swiss national bank intervened. what do we think is going to happen? >> it is kind of interesting. i think when we traded initially, we went down to about 0.87 against the euro with very little liquidity, and they have been intervening at levels around 100 to do this, and they have said they are not going to diversify further, but i think that must be nonsense to be
1:18 am
frank, because if you think the euro is going to lose a lot of ground in the coming years, and that seems to be a consensus call, they are prudent managers so they will have to diversify so buying dollars and other currencies, and that would make sense to me. >> they're going to buy dollars? >> you would assume. >> if taking your advice. >> indeed, but it would depend on how they do it. certainly from a prudent risk management point of view, you'd be selling some of those euros. that would make sense. >> how many damage done? >> an enormous credibility loss. i do not think they will believe a word that they say anymore. certainly, market participants will not. in terms of global most central bankers have done a pretty good job. increasingly doing a better job.
1:19 am
i do not think they will be able to make an awful lot of difference. >> with rehashing old ground but adding another voice to the conversation, either you have the cap, or you do not have a cap so at some point, you need to do this, but what would be the better way? >> i do not know if there is a better way. i think the point is that literally they have been saying this is the cornerstone of the monetary policy. they even said a two or three days before. the question really is can you believe anything that they say anymore, and that is going to be quite difficult for market participants, i think. >> to a certain extent, they have freed themselves from the shackles. they are freer, but for the marketplace, one of the things was raising money into swiss francs, placing money into swiss bonds. where do we go now? for the haven, and i am looking at this and money is gushing
1:20 am
towards the yen. where else do you see the consequence? >> i think one will be that the euro will trade as a safe haven current see, in the sensitive last year. the euro tended to appreciate a little bit. in part, that is because they could not buy the swiss frank obviously, so it was either yen or euros. certainly, it will be bad news for the euro over the coming years, and it does really well during a time of risk aversion but they have their own issues as well. so -- >> we will no doubt continue to chat about it, and with the ecb mario draghi oh saying they have spoken to the economists and 550 billion dollars spent on tv. will that be enough? >> absolutely not. they want to expand this by about one trillion euros, give or take.
1:21 am
this comes in at roughly 220 billion euros, so you have got 800 billion euros that has to be made up. if you look at the abs purchases , miniscule in size thus far. >> and it takes them five days to turn anything around. >> exactly. i think if we get a headline number of 500 billion, 550 billion, i think risk assets would sell off a bit. and then the question is if it is time specific or an open ended program. if it is an open ended program and you can see euro selloff quite aggressively. >> the whole market is going to be talking about this. the 700 billion. and he will stay with us, and afterwards, we will have a little chat about the dollar. stay with us for that conversation. ♪
1:22 am
1:23 am
1:24 am
>> welcome back, and we have a senior fx strategist with us. the dollar strengthening was going to be one of the themes. still, a little bit worrying when everybody says the same thing, isn't it? >> it will probably be the consensual trait of the year without a doubt. and in context, you have got a lot of the other major central banks trying to actively deflate
1:25 am
their currencies, and then you have got the fed who are in a position where they can start to normalize their maturity policy so unemployment and inflation are going in the direction they want to go. as a consequence, you have seen market rates increase a bit in a broad term. it is a no-brainer, to be frank. >> greece. as it been priced in? what does that mean? >> they are basically saying they want to stay with in the euro, so i do not think there is a risk of an exit at all. is it priced in? probably is a little bit, but, again, i think if there is any negotiations for the bailout, we do not know that there will be. these things take time. aggressive selloffs should he come into power. >> when the stores on bloomberg is that there is a lot going on talking about the euro peg to the danish krone will be broken.
1:26 am
>> look. it did not break during the 2008 crisis, so i do not see why it would break now. and it is a different situation. i think it is people putting two and two together. >> what do you make of the commodity currencies? the norwegian krone. selling them all? >> is difficult to make a case. >> get a basket and throw them all in there? >> it is difficult to make a case for dairy traits. they are not appreciating, so that makes it very very difficult, and also if you look at longer-term interest rates they are falling like a stone. watching carry trade spall, and i really do not know why. >> 6:26, and coming up, we will bring you an interview next on "countdown." don't go away.
1:27 am
you can find us on twitter. stay with us. ♪
1:28 am
1:29 am
1:30 am
>> you are watching countdown. 6:30. and looking at the world of risk and at the moment, the perception is the euro is within a risk or or 1%, to be precise in bloomberg terms, of an 11-year low against the dollar and the ecb is set to shape the future of the currency complex, and our guest has just been with us, and his target for the end of the year is 112.
1:31 am
you will get quantitative easing, and the optimal solution for the euro would be an open ended quantitative easing program, so says commerzbank, which does not tell you when it is going to end or the size perhaps a return to an inflation target, and that could catch everyone vice surprise, and asking the people with the money, the market is the most short in 31 months against the euro, so close that there may be an issue with the cover. the euro is declining, and the swiss is no longer a haven, so where would you put your money? euro/yen. higher by one third of 1%, and we're almost at a three-month high for the yen, a three-month low for the euro, and that is as china takes actions, as well to deal with trading at three of its companies in china, and for
1:32 am
what you see is the biggest one-day drop since 2009 also looking at dollar/yen, and some say by the end of the year, a drop like this is an opportunity to get in, because they say 124 is where we are going to be by the end of the year. more stimulus by october from the bank of japan. that is your fx check. >> mario draghi will make his biggest push yet to steer them away from deflation would quantitative easing on thursday and the percentage majority of bloomberg analysts asked said this is higher than the model that was presented to policymakers earlier this month. president obama will lay out proposals for taxes on the wealthiest americans at his
1:33 am
annual state of the union announced, and there is the capital gains tax and the transfer to heirs, and new measures are expected to generate $320 billion, and you will be able to see the president obama state of the union speech live and in full on bloomberg. tune in on wednesday at 2:00 a.m. london time, and the u.k. liberal democrat leader activity prime minister nick clegg in a bbc interview, saying he would propose new tax rises that go beyond the so-called mansion tax. looking to be back in a coalition government it would involve the u.k. independence party. >> it is most likely is that the liberal democrats are not going to pretend -- i might become prime minister, but i think it is most likely that the liberal democrats will have a coalition with labor or a coalition with
1:34 am
the conservatives. >> and the chief executive of bloomberg says their car sharing service could create 50,000 jobs in europe, and speaking at a conference in munich, he said he will seek out partnerships with european cities this year, and the company was banned in spain last month and has had services suspended in germany, and chinese shares have fallen the most it's 2009. the shanghai composite has dropped to nearly 8% after three of the biggest national brokerages debt with their margin trading accounts. they're trying to get control of margin investing to do with the surgeon stock prices over the last six months. >> and staying with china, the hong kong shanghai exchange trading they are looking to increase and improve trading between hong kong and the mainland. mainland china, by relaxing some of the restrictions holding back
1:35 am
investors and fund managers, and we welcome the ceo of the hong kong exchanges who is joining us now from the annual asian financial forum in hong kong or an exclusive interview here on bloomberg. charles, thank you so much for joining us. a real pressure -- pleasure to have you on the program. a strong period, of course, of the chinese market, and you have got a lot of connections into the chinese market, as we just established. i wonder how you look at chinese equities. is there a bubble that you think is there right now? >> i think we are going to see a pretty strong rally for a while. i do not really know when it is going to come back. what we are seeing today is probably the biggest pullback we have had in quite a while, but also this rally is going to keep on going. it will cool down a little bit. when it finishes the pullback
1:36 am
it will be back up again. just too much liquidity so it will take a while. >> do you think that regulators in china are right to be cutting back on margin lending, so limiting the ability of brokers to trade using borrowed money? are they making the right move the chinese regulators? >> yes come he sometimes question whether or not the abruptness or the speed at which they are executing some of these controls, but i think it is time for them to put their foot on the brake because the market is just simply getting a little bit ahead of itself to quickly. margin financing today is probably 10 times over and literally just a few weeks ago or a few months ago, and i think people need to take a break and go back and look at what they are doing and try to really understand the risk that has evolved.
1:37 am
you have a market that is fundamentally retail driven and not terribly mature yet, and a lot of those new creative financing vehicles is sometimes getting people a little ahead of themselves. >> can i ask you about the occupied movement, charles, because clearly, we saw protest activity taking place for many months in hong kong? are you expecting that to return? is your business planning for that type of protest to come back at some point? >> yes, i think the occupation movement is probably over, and it may or may not come back a different kind of forms, but not on that sort of a really organized large-scale civil disobedience that we have seen last year, and even though i think this has been going on a long time for the city, the financial sector is not being affected, which shows the
1:38 am
resilience of the overall market, and it shows something that is not directly associated and directed at the financial sector, and i think there are still people -- deeper issues in hong kong that need time to resolve all of that, but i think the rule of law and the resilience of the market from the markets continued efforts to integrate closer with the rapid developing china economy, but i do think in hong kong proper there are still some issues and social and political that need to be resolved over time so these movements do not come back, at least not in that shape and form and size and scale. >> ok, charles, can i ask you about your link between yourselves and the shanghai market? have you been disappointed with the performance of this stock connect service since it was launched? i understand asset managers have
1:39 am
only done 25% of those that were opened to them since the launch. are you disappointed? what are you going to do? >> yes, i mean, we are not terribly disappointed at all. from our perspective, this is something fundamentally new. the river is running for many many years without a bridge on it, so when we build the bridge, it will take time for people to understand the brakes and how to get access to that rich, and there are things we need to do to make that bridge easier and traffic easier and easier to read, so there will be a number of things we will have to do to make that work a lot better, but i think broadly speaking fundamentally, it works. it is very safe. and i think it is just a matter of time for the traffic to begin to pick up, and i think in many ways the earlier, slower take-up has been reasonably good for policymakers, because many of
1:40 am
the fears, the risks that have been at the focus of a lot of policymakers and regulators clearly have not surfaced themselves and clearly have not become real issues, so it is actually a lot easier now to engage in discussions that lead to building more bridges, shenzhen being another one, and will probably launch that this year, and that will bring the capital market together, and even beyond that, we are hoping to get into the derivatives space and may be commodities because the model that it created allows the people on both sides to trade on the other side but largely observing their own home market rules and in the same kind of a way that they are used to in their home, so
1:41 am
that really created a tremendous potential for investors on both sides of this to be able to access in a market manner. >> yes, it is a fascinating project, charles, and it is interesting to see if it has any president, and then the london metal exchange. how difficult is that proving to be for you, given what we are seeing, the fast-paced moves we are seeing in commodity markets at the moment? >> this is actually a great time to have these assets, like the london metal exchange, because we bought london metal exchange not because we think we can do better. yes, we have done a lot better than the previous owners in terms of its compliance and if operational quality and its technology resilience and we have invested significantly
1:42 am
since we bought it into its systems and into its management and we are on now embarking on the commercial relation of the entire enterprise, so they are in much better shape than it has been in the past. we are also undertaking reforms, but the most important aspect of our buying the london metal exchange is we believe in commodities, particularly ace metal, that there is a potential amount of synergy to bring it closer to the east and the east closer to london in terms of base metal trading, and it is also in the most volatile times of commodity trading, so i think even the prices are going down, we are creating a resilient market for the people and this is a critical time for people to risk management and >> charles thank you so much for joining us the chief executive of hong kong exchanges. >> join the conversation on
1:43 am
twitter. going through that interview with charles there. the liquidity is just awash. 7.9%, close of business. i love margin trading. >> speaking from personal experience. >> personal experience, personal pain, and personal experience with margin calls in regards to hong kong stock. >> flashbacks to chicago and a rather tricky three days hedging out. >> coming up, the last few years have been tumultuous. what is the outlook for egypt? we will ask. stay with us. ♪
1:44 am
1:45 am
1:46 am
>> let's take a look now at egypt, who changed its rate and
1:47 am
there was the move by the central bank to cut interest rates by 50 basis points to 8.75%. do you think this was a precursor to a more flexible exchange rate policy? >> it is a combination of two things, to get the economy going, and i think the inflationary pressure -- the structure reforms that the government took by reducing the fuel subsidy and the energy subsidy, and there was a high fear of inflationary pressure which is now receiving, and the central bank took been right action by reducing the rates but on top of that, i think the focus now is not on the exchange rate but more on getting the economy going so my personal assessment is that we will see further cuts of the interest rates in the coming few months ahead as long as they faced these pressures. >> how much is the lower oil
1:48 am
price for the economy, given the moves away from some of the fuel subsidies, though they still exist, don't they? >> the balance of the energy and oil is in definite, so the reduction in oil prices will have a very good impact on the budget deficit. we still have a large part of the budget deficit financing with energy subsidies, and this will be over the coming five years, but the drop of oil prices from the peak level of $120 down to the current levels of the $50 or $40 it will definitely help the minister of finance in reducing the budget deficit. >> just before coming back from break on you said you spent 14 years here and foreign investment is one of those things that ebbs and flows. as a banker born and bred, where
1:49 am
are we in that story, and what questions do people ask you now as the head of a bank, and what answers do you give them? >> the same questions as before what is the economic dna of the country, what is your dna and you always get conflicted answers. the first time over the past few months in many years you ask that question, and you get the same response from the government officials. it depends on the private sector. i heard that slogan several times from the prime minister. >> and that is a real change, a real break. >> exactly. think about it. the economic dna. what is your economic dna, and it is not very comfortable. maybe for investment is fine, but for long-term, you need to
1:50 am
understand what is the long-term vision of the country, and now it has started to establish that. i think the economic conference that the president and prime minister are launching, it is telling the world this is our economic dna and these are the terms and conditions of conducting business in egypt. you are welcome there. >> what about how he has become president and many say egypt has returned to authoritarianism and many say they prefer stability to democracy and what about the political backdrop? what does that mean with the economic backdrop? >> two major events happened. one, when people walked out on january 25, and there was the change of mubarak and the regime of the time and then president
1:51 am
morsi, and then asking for a change again, so what people are looking for is not to change the identity of the country, the dna and the culture of the country, and this is why people went out. there were three things, and number one was the constitution two is the parliament, and number three is the president, and we did the parliament and the constitution representative from the church to the youth, and everyone has that, and people voted for the constitution approved, and very soon, in april and may, you will have the parliament, and now we have the new asia project. >> thank you for joining us today. good to see you. chairman and managing director
1:52 am
of egypt's largest private bank. >> coming up, we will be looking at our favorite stories, including the oscar nominated movie american sniper that takes the top spot at the u.s. box office this weekend. ♪
1:53 am
1:54 am
1:55 am
this really obliterated expectations. he is still rocking it. >> this is an interesting one. 2014 officially the hottest year on record. this showed me, 13 of the 14
1:56 am
hottest years on record. 13 of the 14 hottest years have been in the 21st century. we are only in 2015, so that's incredible. it's interesting with weaker oil prices what that does. >> how can you envision 6 million people in one area? this is the draw of the pope. it was a bit wet, a bit windy. 60% of 100 30 catholics. -- 130 catholics. this is what you see.
1:57 am
it takes me back to 1979. >> countdown continues in the next hour. ♪
1:58 am
1:59 am
2:00 am
>> the shanghai comp as it slides for than 8% over concerns the authorities are trying to curb -- opposite slides more than 8%. >> a point to a move this week by the central bank president. up to 500 billion euros of quantitative easing. >> could o2 be a takeover target? >> uber europe sees 50,000 new jobs in the eurozone. we are live in munich, where
2:01 am
uber stakes its claim to rapid expansion on the continent. welcome to "countdown." >> let's start with china, where it has been a torrid day for equities. the shanghai cop as it had -- composition has fallen more than a percent. the reason is the suspension of three lending firms from new accounts. concerned that the recent surge in stock prices could lead to instability. more on this. ivanovic, just spell it out to us what the chinese authorities are trying to -- yvonne just spell it out what the chinese authorities are trying to clamp down on. >> basically, you cannot borrow
2:02 am
money to go into this ultra bull rally. use august or magic increase in the year. talk about the plunge. the most in six years. we are talking about 350 alien dollars -- 350 billion dollars wiped out in one day. that is after the government says the largest brokerages were stopped from adding these accounts. nine brokerages were penalized but we did see those tank. eight shares in hong kong tumbling as much as 6% today. dramatic before today's fall. this outstanding margin we see a
2:03 am
pretty big chunk of it. ¥1 trillion as of last week were reported. the big question as to why the government is doing that. are they trying to rein in this ultra rally cup? -- oh two rein in this rally? -- trying to rein in this rally? there is concern it is too much too fast. they raise the minimum requirement for opening these accounts from ¥300,000 to ¥500000. >> it is interesting. when we spoke to the ceo of the hong kong exchange he did not see it as the end of the market we have seen in china. we get chinese gdp data tomorrow. a lot of able will be looking to that -- people will be looking at that and making assumptions.
2:04 am
>> we're going to be watching it pretty closely, around 10 a.m. but the forecasts show the growth may the steepest decline since 2009. gdp growth probably around 7.2%. that is what economists are expecting, slightly down from 7.3% we saw from a quarter earlier. we also saw the property prices coming in from december. prices fell 65 out of 70 cities, which is a slight improvement from what we saw in november with the kleins and 67 cities. housing sales have rebounded -- with the clients -- with declines in 67 cities. housing sales have rebounded, and analysts are saying if this momentum is maintained, we could be seeing possible home sales may have the first annual
2:05 am
increase in 12 months, signaling this could be hitting the bottom of the market. >> thank you very much. >> caroline hyde has joined us on set. the u.k. company has announced it is going to return to the public markets. it's valued at around one billion pounds. the size of the portfolio they have 44 investments in infrastructure. >> 781 million to manage another 961 million in assets. they are going to sell shares at about 130 million pounds. a primary offering up 100 30 million pounds, and it is going to be -- offering of 130 million pounds, and it is going to be
2:06 am
public. they were looking at how to exit this particular deal. they already sold off parts of the company. now they are looking at potentially selling it to macquarie group. now it looks like an initial share offering is what they want to be doing. they are expected to sell a portion of shareholding in the offer. this is an interesting take on the fact we are seeing initial share sales boiling to the surface. it was a busy 2014 in the u.k., and this is a company that is wanting to expand. it is the united states they are targeting, and it is a business that has changed a lot under the current owners. five years ago it was more u.k. focused, more international. >> it was a construction company, but that had to be reinventing itself. it got dragged down by the building of the millennium stadium in cardiff.
2:07 am
it is a terrible deal in terms of finances. it basically is a go-between, a broker of deals. it raises money for infrastructure projects that governments and local authorities want to build, whether it be hospitals, roads, whether it be rails. >> private partnership -- private public partnerships. >> helping the government raise its structure. they have raised a lot from sovereign wealth funds now. they have already got offices in new york. they have projects in colorado. many projects on the go. they are looking to diversify. wind farms is where they want to go. >> they have a diverse list of investments. >> give -- they give you the return on equity. this is perfect for anybody.
2:08 am
never mind the bonds. 23% to 25%. >> it can be a risky business. they are seeing growth they want to scale up. clearly feeling very focused. could this be one of many initial share sales. john lange reported over the press but we could see 30% to 40 -- 30 to 40 listings. already we have got train lines where you book your train tickets online. it could be valued at 500 billion pounds. you have a challenger bank that
2:09 am
wants to take on rbs barclays. he might be selling shares after they sold it last year. many to come. >> thank you very much. caroline hyde with the latest on the ipo market in london. >> just getting the latest. you will be familiar with the name. david duffy you have been in the position since 2011. he is going to pursue career opportunities overseas. they will start a process to name a new ceo at the end of 2011. the total return two and a quarter percent of his peers. this was a lender bailed out at the height of the financial crisis. it flirted with collapse during the credit crisis, but it did return to profit in the third quarter. it is still state-owned. signs of improvement.
2:10 am
for these irish lenders, it is a long haul. >> let's bring you up to speed with one of the stories we are following. hutchison is looking at buying the wireless unit o2 from telefonica. people familiar say the plans are it may early stage -- are in the early stage. they could pay as much as 9 billion pounds 402 -- for o2. >> it is going to be all the attention on mario draghi. after much political debate, the european central bank president is out to be on the verge of announcing an expansion of the stimulus program. -- thought to be on the verge of announcing an expansion of the stimulus program. >> they include purchasing 550 billion euros worth of sovereign bonds. >> let's hope that will provide enough stimulus to steer the euro area away from deflation.
2:11 am
the announcement is expected to come after ecb policymakers meet on thursday. >> it's going to be a fascinating day. we are going to be live in data posts -- in davos. francine is going to be holding a higher level for him. >> francine lagarde, the head of the spanish lenders. i have already seen a couple things going through the studio. they are all going. >> we are here. i will babysit a little bit. >> you can join in on the conversations on twitter. let us know what you want to see more on the show. >> next, we are talking sovereign bonds, particularly reis -- greece. the ecb did meet this week.
2:12 am
the chief rating officer of standard & poor's will talk about a massive week for the eurozone. that is next.
2:13 am
2:14 am
2:15 am
>> time for today's company news. is the travel misery for eurozone customers finally over? they recover. british infrastructure specialist john lange could announce an initial public offering as early as today, valuing the company at one billion pounds. that has been announced that john mine group will proceed with the primary offering on markets. the italian luxury suit maker is tearing up its budget after the y unexpectedly removed the cap. the chief executive will meet the managers today and review everything from the size to reising.
2:16 am
-- pricing. he told bloomberg that about the wake of that move. >> it came unexpected. i think it's a little bit disruptive. it is of concern. our costs are going to go up. i think considering switzerland is strong, i think they will suffer. >> we're going to head to munich, where hans nichols is joined by the technology companies. stay with us. ♪
2:17 am
2:18 am
2:19 am
>> 50,000 new jobs in europe this year alone. that is what uber sees as potential for growth. the ridesharing company has been at the design conference in munich. >> you clearly saw hoover -- uber trying to strike a conciliatory notion there has been some difference all across europe. what uber attempted to do was make it not necessarily
2:20 am
antagonistic. he promised a lot of jobs in an economy that desperately needs it. >> we want to make 2015 a year where we establish a new partnership. we help build the smart cities of tomorrow. we will provide -- where we provide massive economic benefits to cities and their economies. what does this mean at the end of 2015? it means if we can make these partnerships happen we create 50,000 new eu jobs. >> this is a ceo who wants to signal he is willing to work to remedy some of the challenges.
2:21 am
who is going to take over whom? who is going to invest in where? they are going to spend 23 point 5 billion euros on their infrastructure. that's a big dollar figure. one final thought, that 50,000 jobs in one year. notice how the ceo is talking about cities. we will see what the reaction is from regulators across europe. >> we will have more interviews through the morning. the conversation with arianna huffington.
2:22 am
>> the alpine resort in switzerland with the world leaders and top ceos in attendance. it is a good week for high-end hotels. is one week in a year enough to sustain a business model. we take a look. >> like a bond villain's layer the devils continental is for high worth individuals. known as the golden -- the davos continental is for high worth individuals. known as the golden egg, it is surrounded by our wire, guarded by swiss -- barbed wire guarded by swiss soldiers, but it may not be enough to protect it from bankruptcy. or did it go wrong? -- where did it go wrong? the hotel struggles to fill its beds. hard to believe it could fail.
2:23 am
even the local authorities burned the planning see. credit -- see. credit suisse pumped 152 million dollars into the side. -- landing fe -- planning fee. while it is fully booked for the week of the forum the problems may deter other high-end ateliers from setting up in data posts -- davos. >> we make it an official word -- get an official word. they could purchase sovereign bonds. the debate about risksharing and what to do with bond from countries with the lowest credit ratings remain open. with us is the chief rating officer of sovereign ratings. a good morning to you.
2:24 am
inc. you for joining us today. >> good morning -- thank you for joining us today. >> good morning. >> will it be bold enough to steer the economy away from deflation and give the economy a lift? >> we can only answer that question once we have heard what the announcement is. speculation is rife and what it may say. the expectation is quite clear of the market. there have been other statements made over the weekend about the potential of burden sharing mutual is a should and of the risk being broken up in bits -- mutualization of the risk being broken up in bits and pieces. the swiss national bank throwing in the towel it is also a lesson for the eurozone that central banks by themselves
2:25 am
cannot solve all the economic problems. i think once you have structural underpinnings of the challenges as we believe the eurozone is having, then the government really need to -- governments really need to prop this up. >> we will come to those structural issues in just a moment. let's say it is 550 billion euros. is it enough? we spoke to guess saying it has got to be near one trillion euros. would you concur with that? >> i don't want to participate in that game of who can quote the biggest number. i remember that draghi famously said it takes all that it takes. he will do all that it takes. for that reason, i think in principle talking about any limit if it takes more is not
2:26 am
useful. i think they have to start somewhere. if they start somewhere they have to take into account the various differences of opinion across the eurozone and they might start with 500 billion. we need to be rather cautious. when we assess the power of central banks to fix the wrongs if the number is big, this would leave complacency. the government is continuing -- >> do you think they will be included or excluded because they do not meet a certain criteria? >> the greek government bond does not qualify as long as you are in the program. then you can still be included.
2:27 am
that is for the eligibility requirement of the ecb. what belichick -- what that criteria will be remains to be seen. we wait for the outcome. much will be cited in the aftermath. we have very little visibility and we also don't know what the negotiation stance would be. there is a lot of posturing right now. once you have a new government coming in, they have to find solutions as well. there might be a compromise where greece could be included but right now the criteria need to be determined by the ecb. we will hopefully learn something on thursday. we're still detailing going forward similar to what we have heard at the abs program when it
2:28 am
was first announced. the details came much later. >> that leaves me with a great collection. do you think it will ultimately lead to -- with greece. do you think it will ultimately lead to maturities? where do you think it will come when it comes to the debt burden? >> we need to remember the debt burden is vast but not very expensive to service right now. most of the debt greece carries is with official creditors, particularly with the european partners it has been expanded. it is not very expensive. right now greece has a primary surplus in spite of the low growth and the debt burden. the european partners have been saying once you have a primary surplus we can discuss the alleviation of the debt load
2:29 am
but i think the preferred metric would be further extensions of the debt rather than an outright haircut on the face value. the outright haircut on face value would be much more difficult to explain because it looks like debt forgiveness. in present value terms it is the same thing. >> are you even contemplating a great exit from the eurozone? is it possible? some people are putting percentages -- 20% 30% -- is it at all likely or not? >> we continue to say we don't expect a great exit, mostly because it's not in anyone's interest, least of all the greek interest. it sounds very tempting when you don't think the implications through, when we just devalue and we will see
2:30 am
how the exports pick up. i think in the case of greece the cost would be massive. the greek economy would be hit by a wave of default of the private sector certainly the public sector as well, because the euro debt would be unserviceable once you have an economy where the revenue has been generated. i think it's not in the greek interest. if it happens, it's because of political debates of over shattering the rationale. it would be illogical for greece to exit now after seven years of austerity and adjustment. if you were before the pain is incurred you can discuss it, but in the end the trust seems to have been reached. there are green shoots of growth . editing now that's exiting now
2:31 am
would be reckless. -- exiting now would be reckless. he is not saying we want to leave the eurozone. i think there is no consensus emerging at all for leaving the eurozone in greece or anywhere else. >> you did touch on the snb movement, how it was possibly linked to what the ecb is going to do on thursday. i know it's not directly your thing, but sovereign ratings is your thing. you look at the swiss bond market, and from one to 10 years, all bonds are negative right now. can you tell me your assessment of the move and possibly some of the unintended consequences of the ending of the cap between the euro and the french franc and taking the rates to -75 basis points?
2:32 am
what do you think some of the unintended consequences might be? >> there are huge risks. switzerland has been in deflation before. or is a real risk we fall in much deeper deflation that what we are currently contemplating in the eurozone. this could lead to a situation where household would delay. you have obvious impact on growth because some the -- some sectors are very export dependent. you have the risk that might crystallize over the next days or weeks that not only are some of these smaller and important operators but maybe some international institutions on the wrong side of a bad year on the currency and there might be
2:33 am
financial instability coming from that and. -- end. certainly the snb was aware of it. they had to be puzzled for some time why the swiss franc was not weakening against the euro because there was the perception the eurozone was over, which is a position we never took tom and now it is quite clear it is not over. there was -- we never took, and now it is clear it is not over. they would have to intervene further and further. the balance sheet was 80% of swiss gdp, which is a multiple by more than three of the fed's balance sheet. the risk of continuing to pile in euro denominated reserves and eventually having to face an appreciation, the cost would have recent -- risen even further. with qe coming up and their
2:34 am
expectation and therefore the euro becoming weaker still, more downward pressure on the euro the cost of maintaining the long-term would have been too high. the currency we don't know. >> go on. carry on. >> what would have happened if they hadn't, we don't know. the s&p needs to -- smb needs to balance -- snb needs to balance certain courses of action. they are saying, going forward we don't want to carry the risk. it is at least intelligible. we need to understand the swiss economy has been doing fairly well. there is great concern among the exporters in switzerland. that is natural. this is on the top of the
2:35 am
already weak order. there is declining income from the european union, for example, but the swiss economy has been doing fairly well through the crisis. the gdp is around 8% above precrisis levels. closely the exports will suffer. >> every bond from one year to negative is. what is the european bond market going to be looking like in six months. kuester many as having a negative yield.
2:36 am
i think what this signals it is below the inflation target. this clearly signals the market doesn't have much confidence that inflation will go back to where the ecb wanted to be. that is a great concern for draghi and his team. he has been saying quite clearly the un-anchoring of inflation expectations is something they are watching closely. one clear way to gauge this is the bond market. if we have negative interest rates, some of the capital that is intended, that is part of the intention of the monetary policy stance, they will try to look for different destinations. they will try to invest in something else. while this is intended this
2:37 am
carries the risk of further misallocation of further capital in some areas where you might see bubbles developing and that's the same risk switzerland is facing warehouse prices have been growing faster than any other developed economy in real terms. there is no cheap win. central banks have to play an important role in recovery from the crisis. it's important that no complacency sets in. it contributes to recovery of growth. i think this is the ultimate test. the ecb can set the scene that can open the window of opportunity, but they cannot solve the problem. it depends on what governments
2:38 am
do with the space. >> you say the rebalancing that has taken place within the eurozone has actually ground to a halt. you are saying it is gradually reversed. what damages that doing to the economic recovery, particularly -- what damage is that doing to the economic recovery? what does history tell us about societies and countries that fail to pay back to address their external debt burden? >> what we are referring to is the bilateral trade imbalance between germany, so far the largest creditor nation in the eurozone and the periphery. we are seeing germany continues to have trade surpluses with the largest debtors, which are spain, italy, portugal, and greece. since last year they have been rising again. that means the actual liabilities cannot decline as fast.
2:39 am
this means the adjustment rocks us -- adjustment process drags on longer. the reduction that some countries are carrying has to happen with the rest of the world. that is only a part of their trade partners. it takes longer. that means the reduction in consumption investment that is the corollary of higher savings will have to go on for long, and that means the discontent rise in social fabric becomes weaker. that is what we are seeing in europe right now where we are observing a surge in eurosceptic parties pretty much across the core and the periphery. this is a key moment to watch in the near term in terms of historical precedent we have some experience here in germany following the period after the
2:40 am
first world war, when it was famously argued the debt burden for germany is not sustainable and that the political consequences would follow. it was a complete calamity not only for germany before the world. by no means would i suggest we are anywhere near such a scenario today. clearly, policymaking has to happen in the real world. the real world means you have to keep in mind that the general public, while it may not be difficult for economists to solve those problems politicians need to do this in the context of an electoral system. as jean-claude uecker -- juncker famously said, we know what to do. we just don't know how we get reelected after. >> thanks for sticking around and discussing a big week for
2:41 am
the eurozone economy. morris cramer, the chief -- kraemer the chief officer at standard and poor's. >> i love what he actually said. ultimately it is a chance for the european central bank. it is going to be down to the central bank. the euro-dollar you can see the overall euro-dollar trade. the euro is down 5% against the 10 biggest currencies. traders in the market are betting the most against the euro-dollar in 31 months. 93% of the economists and analysts we surveyed said you would get qe on thursday. the question is the size.
2:42 am
you have got to start somewhere. probably starting with a sizable figure would be a good jumping off point. the commerce bank suggested 112 was the number. that is open to negotiation. we have seen the euro bounce a little bit from it's almost 11 year lows. let's have a look at the end. we have china taking action against market trading. the shanghai composite index dropped the most since 2009. your down, yen up. dollar down, yen up a third of 1%. the view from one or two of the analysts would be any of these dips you see is an opportunity to jump in. the rise of again is an opportunity to sell. 124 by the end of the year. 26 out of 33 we surveyed believe you get more qe from the bank of japan. >> let's get to our top stories.
2:43 am
chinese shares have fallen the most since two thousand nine. the shanghai composite index dropped almost a percent after three of the nation's biggest rogue ridges were stopped from adding trading accounts. concerned that the 63% surge in stock prices over the past expense may lead to instability. oreo druggie will make his biggest push yet to steer -- mario draghi will make his biggest push yet. 93% of respondents in a survey say that tron be as likely to announce a 550 billion euro bond -- mario draghi is likely to announce a 550 billion euro bond package. the yours ceo has said -- uber's ceo says his company could create 60,000 jobs in europe. he said he will seek out partnerships with european cities. the economic expansion has been
2:44 am
hit by regulatory pressure. the company has had services suspended in germany. president obama will lay out proposals for new taxes on the wealthiest americans in his annual state of the union address tomorrow. obama plans an increase in the capital gains tax and attacks on asset transfers. the new measures are expected to generate $320 billion over 10 years. you will be able to see president obama's state of the union speech live in soul here in bloomberg. -- seoul here in bloomberg. continuing coverage through the day just in case. also proposing tax hikes on the wealthy. like said he would propose new tax rises that go beyond the so-called mansion tax. he said he expected the lib dems to be back in the coalition government, but he would not join any coalition that involves
2:45 am
this. >> what is most likely is the liberal democrats in -- i'm not going to pretend to be prime minister. it is most likely they will be coalition labour or conservative. >> do join the conversation on twitter. these two have been tweeting like crazy. i have my own personal news service. >> nicely done. >> my fingers are burning. up next -- >> it is bar chart time. you have had enough of me. the swiss franc is now more volatile than the ruble. stay tuned for that.
2:46 am
2:47 am
2:48 am
>> the swiss franc is more volatile than the ruble. the ruble is the yellow line. up until last thursday the ruble
2:49 am
has been the world's most volatile currency in the last 12 months. the russian currency look what happened to volatility. fluctuations in the franc last thursday jumped to five times those of the russian currency on a 24-hour basis reaching 200 61%. on friday volatility came down. it has fallen below volatility of the ruble. interestingly, even when the russian central bank unexpectedly raised interest
2:50 am
rates to 17% right here, that was december 15, volatility wasn't as extreme as when the snb and the cap. ruble volatility has been picking up since russia allowed it to flow freely in november. that accelerated the appreciation triggered by russian oil prices and sanctioned over the ukraine conflict. it has been a short-term spiking above russia but for a few days ruble volatility was below franc volatility, not something you have seen before in the last 12 months or even before. >> japan's 10 year bond yield falling to a record low of 0.2%. loan bond yield, something tells me this is going to be a big
2:51 am
topic of conversation as we go to dev posts -- davos this week. we will be broadcasting their all this week. hutchison is looking to buy o2. the plans are at an early stage. good morning to you. remind us who is buying who and the telephone world. what is the appeal of -- in the telephone world. what is the appeal? >> they want to expand in europe. we know telefonica is keen to sell this asset. they wanted to explore options. we were talking about may be an ideal. if you remember bp was talking about by a carrier in the u.k. they were talking about 02.
2:52 am
they are in talks right now. >> what is behind the deal? all the discussions are still open, aren't they? you have lee cash in -- you have some irish assets. what is he trying to shape? >> one thing to keep in mind is europe has accounted for half the revenue. it is very important to him. he has been talking to an italian carrier about acquiring them. it is the organization that gives him more firepower. they go up and do a deal like this. this isn't a time to look at buying carriers. >> what does it mean? >> we will go from four to three. will they allow the number of
2:53 am
carriers to reduce to that? we will have to see when they come out and announce they are in talks. it is a market bp has set up a string of dealmaking. >> ubs announced their first take on the deal. if you put this they would have 41% of the u.k. market. you think red names like vodafone, -- brand names like vodafone, but these other sub brands don't immediately come to light. >> it is interesting because right now it is the smallest. this is great. you are going from the smallest with the dominant position in the market. >> who is next? we have bp 02 --what is next?
2:54 am
but there was a discussion about whether vodafone was going to buy mobile. >> are we done yet, or is there more? >> we're going to see more telecom dealmaking for sure. >> thank you for that. there is only one story that is going to dominate. >> he wasn't playing the guessing game. the guessing game is how much will the ecb spend? the economists say 550.
2:55 am
we are going to reach the inflation goal. those are the key questions. >> those will be interesting. if you get a big number, that could be bad for him. it might incentivize government from taking tough decisions around the economy. one of the big questions is going to be risksharing. how are they going to structure this to enable the national banks are all the banks in their entirety? how are they going to structure it in terms of where the risk false? >> the other thing -- where the risk falsls? >> the other thing is the logistics. it would take them eight years. it takes about five days to turn
2:56 am
them around. this week will cover it all. "on the move" is next. we have an exclusive with the linkedin cofounder, reid hoffman.
2:57 am
2:58 am
2:59 am
>> good morning, and welcome. moments away from the start of european trading. a big week ahead right here in europe. chinese stocks meet gravity. equities plunge almost 8%, the most in six years as policymakers try to crack down on surging stock prices using our own money. swiss franc carnage. it left them one day and it hundred 30 million dollar fund -- an 830 million dollar fund was wiped out. great expectations.
3:00 am
just eight days and counting until the big central bank decision. 93% of respondents expect mario draghi to announce quantitative easing. i am looking at futures markets climbing high. dax futures up by 63 points. this monday morning it looks like we will get a higher open for the market open. >> you hit the nail on the head. equity markets are rising. it was a dip in china that this poll had further to run. expectations are very common with bank saying perhaps the shock and awe, saying the ambition is to get back to the inflation of 2% and leave it open-ended.

43 Views

info Stream Only

Uploaded by TV Archive on