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tv   On the Move  Bloomberg  March 5, 2015 3:00am-4:01am EST

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7% is the goal for 2015, but is that too ambitious as the nation faces the headwind. and abbvie will by the pharmaceutical $421 billion. much more to come on that story. euro stoxx 50 up 1.5%. the german factory orders did little to quell the market. let's get to caroline. >> 20 seconds in, how is equity markets shipping up? we are tentatively higher ahead the ecb, the bank of england named its central bank frenzy today and economy frenzy. china coming in setting its
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lowest target in 15 years for growth. they say we will aim for 7% how will that affect commodities markets going in. they realize they cannot put growth ahead of everything else. 2/10 of a percent higher and france and they're waiting for the dax to open always a bit slower in the morning. the euro focusing on what is moving ahead of the central bank and later today mario draghi will paint us a picture of that 1.1 trillion euro stimulus row graham. what will he be buying and when will he be buying it. they're down 2/10 of a percent and the euro has been falling for six straight days now. we are currently at one dollar 10 -- $1.10. after that we are going to 0.9. we will hit parity next year
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says goldman sachs. let's have a look at gold, a little bit flat ahead of that on buying program. meanwhile oil is down again for a third day -- actually it is falling down 3/10 of a percent, it had been on an upward trajectory that is about u.s. stockpiles easing that little bit. we do have a few notable earnings coming out today, top among them france's biggest retailer climbing only 7% strengthening in brazil and argentina. adidas waiting for that to open as brazil is a little bit sluggish. it is forecasting 2015 profit to rise from 7% to 10%. how will that look?
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we still don't know. they unveiled their five-year sale planned march twice six. there ago adidas popping out at 1.0%. we see with all of these oil affected companies, as the market is unlikely to recover for at least two years, still pain to come. >> think you for that roundup. that is the state of play on the equity markets. the euro hit a seven-year low as i said to you in the equity markets. a 1.1 trillion euro war against deflation. mario draghi is in cyprus and so is jonathan ferro. john, you are out and about this morning, what will be your key focus? >> i have to apologize because i
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seem to get the good gigs and you get put on a bridge in zurich and i get sent to the beach. mario draghi bringing the governing council down to cyprus. things are better in the eurozone. you strip out these ugly german factory orders, the pmi's are firming up and retail sales have picked up as well and qe has already been announced. today we want the color, what does this plan really look like? what are you going to buy? duration. do you really what to buy that six-year debt? the news conference will be dominated the questions on the qe plan but the ecb has a pivotal role to play between the nation of greece and their creditors and i don't think mario draghi will be able to complete that press conference without a series of questions on greece and the situations in athens right now.
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>> jon it has taken two years for the banking sector -- it collapsed inside and they were bail outs and aggressive moves by the bank in cyprus and that has been a worry about what might happen in greece and could things happen again? have things materially improved? >> i spoke to the finance minister who is more optimistic but cyprus finds itself on the geographic and economic extremes of the eurozone. it is closer to war-torn syria then frank for. -- frankfurt. the big bailout, the capital controls that's -- that crisis and the movie we saw over the last two years, does that come to a theater near athens? cyprus is not out of the dark
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days of 2013 just yet. that is the discussion i want to have with the bank ceo and i will do that with the ceo of the biggest bank the bank of cyprus and 30 minutes time. >> we look forward to that enjoy yourself in the sun. i get ridges in zurich in the snow in the winter time and you get beachside holidays. something i'm definitely doing wrong. we will have the rate assertions from the bank of england and the european central bank later on in the day. the boe comes out at noon, don't miss full coverage of the press conference. i will bring you that from cyprus. let's get an investors take. the deputy chief investment officer of fixed income at black rock. there is a story on the terminal
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which says that european government bond yields on average are just over .5%. the lowest since 1999. european bonds overturn 13% since the u.s. introduced qe are we all done? are we'll priced in? -- are we all priced in? >> there are a number of ways to look at it, without a premium for italy or spain or other countries -- one thing you'll notice is the two-year term rates are -20 basis points. so one could say the front and of the yield curve is fully priced for quantitative easing that today is a critical day. we'll get announcements about the terms of that qe graham and how they will implement it and what formats they will use and will there be restrictions? today is a very critical meeting
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for the near-term direction on those rates. >> as you mentioned germany they are negative at 30% of the european government bonds. it is fair. you are all in love, war and competition. we never thought we would ever would have seen this. these are the dirtiest markets i have ever seen in 25 years. does that continue? do we see more? where does that chase for negativity and safety go? >> there are a couple of things the question about where we are in the economic cycle and the qe program is relevant. the economic situation in europe has been improving and today we
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get the 2017 forecast for the ecb so it will be interesting to see where the forecasts are and that will give us some sense as to whether the rate environment will be more persistent in the near-term. >> if qe is the bulldozer of why we are seeing negative rights -- rates, there are other issues. i looked at some of the forward looking interest-rate indicators and they are turning higher. your job at black rock is not to get lost in the noise of people like us. where are we? have we bottomed out in the disinflation story? >> it is impossible to call the bottom of the oil market what i would say is, the fall in oil prices in america, gasoline prices have come down to manically and in the u.k. less so, but that has been very
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stimulative for those two economies. we see that in the u.s. and i think we will see that in the u.k.. what we think will happen in the next year is the policy of diversions. -- give urgent's -- divurgence. as you develop investment on a fixed income, when you have that eight or 9% return on the global fixed income market that will be challenging, but there is a lot of opportunity as bank policy and interest rates start to diverge. >> a lot of them have started to tame themselves up. if i look at 10 year bonds in the united states over germany it is the widest since 1989, it is 1.75% wide, will it get wider? u.k. over germany is widening.
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is that how you look about setting up the bond folio, do you do it to bonded differentials? >> you suggest the widening of the spread that has really been a fundamental aspect of the economy, qe in the u.s. happened a long time ago whereas europe is lagging. i would suggest in the near-term you will continue to see that divergence. it is hard for european rates to move materially higher. so we are positioned for that to effectively widen. but i would be very cautious about how much further can your payments actually fall to get to the pricing in of quantitative easing antedate will be really important for the investment thesis. >> there are a variety of things that are more restrictive and
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those bond markets are not as deep. would you concur with that and give me your left field which is outside the normal storyline which is -- you have a slider -- slightly outlier in your notes. >> the view of the positive on market has been a peripheral one. i would say it is very hard to apply fair value analysis because quantitative easing and expectations is so powerful. portuguese ten-year bonds at 34%, it is hard to say if that is a fair value or not. given the brett of the program -- breadth of the program, the amount they buy is extraordinary. that should continue to dampen the 10 year yields but the buying ahead of the market story is -- we still like peripheral blood
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markets but we are a bit more cautious. >> stay with me, we have another bit of the world to travel across. next we had to beijing as china drops its growth forecast to a level we haven't seen in 15 years.
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>> china's national people's congress is underway.
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the presidents of the growth target at the lowest in seven years -- 15 years at 7%. this is where the imf thought the benchmark rate would be and the world bank, are we that surprised? >> to be honest, not really because most of the analysts that bloomberg survey and many of the people we spoke to had predicted this 7% target growth rate and we know that the chinese economy has been slowing for some time and this target does allow the policy makers more wiggle room to try and pursue growth which is still a fair amount of growth to target. along with long-term goals of reform and many of the sectors of the economy. this is what the cochair had to say this morning. >> we need to maintain policy continuity and keep expectations
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stable while moving forward with reform and structural adjustment. we need to develop twin engines to drive development. this will and sure that our growth rate is adjusted without weakening momentum and the quantities are underpinned by greater quality. thereby achieving better quality and upgrading the economy. >> this afternoon we heard from the and drc -- ndrc and they said the 7% target rate is the new normal and said this is in line with china's five-year goals. li kequiang had said that tolerating a lower level of growth was fine as long as there continues to be job growth. obviously the government does
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think that 7% will generate enough jobs. last year the economy hit 4.7% growth, so obviously they think this year they should be able to create enough jobs as well. 10 million jobs is the target for this year, the same as last year. 7% growth, many nations would be very happy with that and china is the new normal. they have also set some other targets and the budget deficit widening slightly to 2.3% from 2.1% last year. >> thank you very much. scott field is still with us he is the deputy chief investment officer of fixed income at lack rock. she was talking about china and it is not exactly a rocking piece of news but one thing that consistently catches my eye is
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that china and japan are both huge holders of u.s. treasury but that complexion is like a moving feast at the moment. what is it that sticks out for you in that story? >> japan is an interesting mix because you have the central bank and the government working together to implement the plans. there, they have much more coordination. so in my mind that means the policies are very powerful. what they have done in is driven jgb rates very low and what is interesting is in the last several months we have noticed an increase in volatility which is a very interesting feature in the market is what that suggests is there may be movement out of jgb's into other markets. after member they are owed predominantly by japanese investors.
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when you start to see increased volatility it would suggest to us that there is more investment being made out of jgb's into international bonds. >> i was looking at the numbers on jgb's japanese government bonds, a almost doubled in yield. quite a quantum move in terms of the market has that trajectory finished or do you think there is another substantial -- substantive move? is the money flowing out? because yen is strengthening up 5% since the beginning of the year. >> the way you think about yen volatility is very relevant. if you start with a yield that is only 40 basis points to begin with and then it moves five that is a big move. what happens is jgb is starting to exhibit treasury-like volatility.
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i would suggest that investors are moving out of jgb's into a whole series of different assets. i think u.s. equities and european equities and global fixed income areas >> -- income. >> everybody in the newsroom -- i like to think everybody has a seven-year itch. it is a six year anniversary for zero point 5%, when will they pull the trigger in rising rates? >> there are a couple things we look for. the first is the fed has to move. mark carney is not interested in leading the charge of higher short-term rate. number two, he has to recognize the strength of the u.k. market. what is important is the number of vacancies is smaller than the number of job seekers for the first time in many years.
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the last time we had that relationship of nine vacancies for 10 jobseekers the basis rate was nine. in my mind, given the employment situation in the u.k. and the u.s. trajectory, the bank of england should follow and i would suggest august is a bit of an early call but that is consistent with the federal reserve moving in june and the bank of england in august. >> great to have you with us, the deputy cio of fixed income. coming up, mega m&a in the foreign sector. details next with caroline hyde.
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>> in a last-minute twist, drug company abbvie moved in. caroline hyde has the details. so they came in at the last minute but there is good reason for this deal. >> 244 times pharmacyclics net income last year. that is the biggest pharma deal of this year. they managed to come in in the last minute and barge johnson & johnson out of the way and snap up the company, but why? it is all about the drugs they produce. in particular pharmacyclics
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makes one that is so good for cancer patients because it avoids certain serious side effects when you're having chemotherapy. this is a stellar drug and analysts say this is one of the best-selling cancer drugs of all time. no wonder they were fighting so hard. already johnson & johnson have a deal to make this drug with arma cyclic's, they didn't go -- with pharmacyclics, they didn't go with her partner. nevertheless, it boosts abbvie's pipeline. >> this is one of the first mega deals of 2015. they have been knocking on locked doors. >> shy a was the deal -- door they have been desperately eating at but that deal got
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canceled because the tax efficiencies didn't work anymore. they changed some of the rules and no longer being in ireland would've helped but only a mega deal. >> coming up, the ecb is out on the road in cyprus and we are, too. jon ferro is there. we speak exclusively to the ceo of the bank of cyprus. stay tuned. ♪
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>> welcome back to "on the move ." equity markets are up and running and they are in good form. you have the dax at 11,451 second in command is the paris market 49 .42. the devil will be in the details on the trillion euro span from quantitative easing to the european central bank. let's get to caroline hyde and see what stocks she has to watch.
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top of the leaderboard is hunting plc up almost 6%. the picture is not all that pretty and they're saying the rapid decline in the oil and gas injury -- industry this is an international energy services provider. when big oil companies cut back their spending they hit but they are managing the situation well. expected dividend ahead of expectations. overall they are tackling well at the debt is coming down and they're boosting free cash flow. the stocks are rising on that surprise boost. meanwhile aviva's top of the leaderboard. up almost 5% this morning. the u.k. insurer in the midst of buying -- it surprises investors this morning, increasing payouts and raising dividends by 30% and
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also reported for higher profit up 6%. let's get to the laggers. this is a private equity company selling some shares, not just any amount but 18 million shares. 22% of cbc's overall holding. it is profiting and taking profits in the industry and it falls with more supply and the market. >> greece is in the spotlight today. a last-minute deal was agreed between greece and its creditors. today, the ecb's meeting not in frankfurt but in another nation cyprus. jon ferro is standing by on
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location today with a special guest. >> thank you very much, i am pleased to say i can bring to you exclusively the bank of cyprus ceo who joins me right now, great to have you on the show this morning. the guys behind us, the ecb they have unleashed a qe row graham will give us details today. they say this is really about getting the bank to lend. >> i think it will have little impact on banks initially. but equally we have a very simple problem -- problem which is we have a very high level of nonperformance and we need to get people back to repay their loans and put framework and place to make sure that occurs. we of course want to lend so let's see if it works. >> for you, for the bank of cyprus the npi is going up is
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it getting worse? >> the definition is a trap. things get captured in it and they don't get released it is a bit of a hotel california. so your productive asset statistics can get worse. we are not calling it a trend just a lot of active management to stop it exploding further. >> some would argue that a culture of people not paying mortgages or loans, there are no enforced foreclosures in this country. the government has been talking about bringing that law in for a while now. the government finance minister said it could come in a matter of weeks, what is your message? >> we have to get this in place. if we don't put the proper framework in place and make sure the right insolvency practices are in place we will upgrade the foundation prosperity's.
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so my message to the government is put this in place and let's start talking about the future and not make the mistakes of moving the pieces around the board and not making progress. >> they watered down to basically nothing but cyprus has counsel controls, one euro in that cyprus bank at one point was not the same as one euro in a german bank. if greece has capital control from what you have seen how bad does again for the economy? >> we widened the gates efficiently on capital controls for them to be almost irrelevant in this context. it is dangerous for an economy and it isolates its -- isolates it from the normal functioning economies. >> we have seen quite a few billionaires come out to cyprus the likes of dan loeb taking stake in cypriot banks.
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we can see this bank of cyprus as a part of the recovery? >> these guys are investors investing in the equity of the bank and they believe that equity is valuable in the future and they will contribute their expertise and they're here to treat their five years on the horizon and we expect to make them a decent return and these guys are sophisticated. the banks of cyprus are a warrant on the economy and they believe cyprus can recover. >> has it stopped? are you starting to see money come back? >> as we moderated capital controls and the trapped deposits in the bank we saw some deposit outflow but for the fourth quarter of 2014 we saw that deposit growth across the currency and the whole of cyprus itself and we have seen that deposit growth continue from january into february so signs are looking good. >> what about your relationship
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with russia? we know you have a russian union and it has been a struggle to the bank of cyprus, what do you expect? >> it is no secret we have a process under way to restore the ownership of our russian assets. i don't want to prejudice any aspect of that by giving enter update but it is more about the evaluation of the ruble and the tourist impact on cyprus. there has been debate around the authorization and debate around sanctions and do they impact cyprus? the sanctions have been almost irrelevant for cyprus because the nature of the clients we have here are not the huge clients the sanctions have gone after in the business we have here is very heavily kyc'd. the real issue is 50% of the cyprus gdp is tourism and 20% of that is russian and that means people cannot travel. the site risk government is being vocus on replacing volumes
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in order to avoid destruction of some parts of gdp. >> for the bank of cyprus are you still going off -- after that russian deposit base? >> we have 50 tax treaties around the world that serves similar to ireland in an eastern gateway into the eurozone and what the eurozone offers. they are heavily managed and heavily aml'd and heavily kyc'd . they are still with the country and still with the business. >> you mentioned some of the data coming through has been quite remarkable. it is some of the best performance in the eurozone. isn't it too optimistic? >> cyprus has recovered much faster than ireland. cyprus had a surplus last year
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and has done a good job of putting together all of the majors so as not to waste the crisis. the foreclosure law is an example of what has gone wrong but i think cyprus is positioned for growth but we can of course interrupted by not continuing to put in place the memorandum issues. >> just to wrap things up today they will tell us what this qe plan will look like and what they're going to buy etc.. but these loans are not unique to cyprus you see it in italy and spain and the situation is not getting terrifically better. what kind of difference is a qe plan when you have so much nonperforming loans across the eurozone? what is your message? >> in an environment we have all-time highs to the stock market and historic heights and bond markets that is a dislocated set of macros. cyprus is really a set of the
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macro in a very small economy. if qe can make a difference because of the small open economy. qe is designed to take government assets off the balance sheets of investors and forced them into slightly riskier assets to encourage lending. i think the world is over borrowed, we have seen leverage the lot across the world in seven years and we have an issue in terms of the amount of debt during but the entirety of the world given the level of qe, government expenditure and government deficits, it is manifesting itself in a huge debt pile. >> before looking at the bond you have a third of the eurozone with -- what does that mean for the banking system across the eurozone? >> i think the world and the economies of europe are generally over borrowed.
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we have to find new way of doing things we probably have to go for extended tenors on mortgages and larger balloons in the end. we have to start looking at new things. when the same things faster and doing more of the same things is not proving to be resolving this crisis and i think these guys need to think outside the box. >> the ceo of the bank of cyprus joining us, the message more of the same, isn't necessarily the solution. back to you. >> thank you very much, a great interview. with the ceo of the bank of cyprus. jon will be at that news conference this afternoon and we will give you full coverage later in the day. >> that will be with me, we will introduce him and listen to what he has to say. up next is another ceo. enter exclusive interview with
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olivier piou. ♪
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>> this is "on the move." revenues came in at 5% higher and the company raised its long-term profit goals. joining us now is olivier piou.
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great to have you with us this morning. your dividend is beat and you retained your guidance for 2017 and when we think of your business we think of cyber security and bank cards and the chips that are in that and payments in smartphones. holding those targets, where are the earnings constantly going to come from? will it be the chips or the software? which part of the business will perform? >> first the values components are growing simply because the industry becomes more and more mobile and more and more digital. it needs our technology for security. it used to be more sleek telecom space and as you describe well diversified into the banking and
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then into the government application with the passports and all the issuance symptoms -- systems. and now private security for cyber threats and automobiles were connected objects and so on. the growth is in fact across the board in products and the platform and services. >> i wrote down here in front of me, cashed the check, check to card, card to twitter and the next, dot dot dot that i have in front of me is my life in payment on my wrist. wearable tech. how quickly do we move away from the card which is another progression. >> we have already started to do the wearables in spain, where
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wristbands so that you can pay when you are on the beach and you don't have to carry a wallet with you but that is gradual. they represent only 15% of the transactions. checks are still around and mobile is on the rise see you have to differentiate between the growth rate when you start from nothing in mobile payment, the growth rates are higher the when you look at where is the money it is still with the sim cards and the passport and the services that are around. twitter and what is next will come and it will take 10 to 15 years before the become massive. >> the other stories written around your company are apple doing their own sim card and
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i've heard your story that it is a growth opportunity. what comes to mind for me is why look at what everybody else is doing are you not really just and true for somebody else to come along and by your intellectual capacity, your knowledge because these guys -- they are so gargantuan number it would make sense that you would cooperate with them. >> you cannot be on the stock market and not run the trick. that time when we were less and 400 million and convinced that it would open up within a week. now we are up several billion, those companies have huge resources but you know we grow
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in believe our own destiny and when somebody offers 500 euros per share we will be done. >> i love you trade at 70.47 and your valuation comes out around 500. where am i most at risk? is it when i am booking an airline ticket or when i'm shopping on amazon or ebay? where am i most at risk? is that not the next big revenue stream? >> today there is a difference to make between you as a consumer and your service provider. you as a consumer are well protected. whether a sim card or banking card or passport if you want to attack aimed one million account
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yet to find a one million banking card individually. so you are more a threat inside the retailers because those brands have historically not been giving attention to the security of the data. governments are very security conscious but a lot of the new service providers have no experience. so when we secure the cards for example so when you talk to vehicle to vehicle communication you don't expect to achieve rogue information so your stock crashes. these are new domains. if you take harvest the home depot, they are after significant data sets and this is why we acquire a company called safenet at the end of
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last year and this is a big avenue for growth. how you protect the data which is your data but resides somewhere in the cloud. >> olivier, let's leave it there for today. credit cards will soon be around for a while. we now know the valuation that samsung once, thank you so much. the ceo, have a good day sir. that is live from paris let's tell you what is coming up -- let me tell you a little bit about hathaway. this is interesting. hathaway has decided to sell eight, 12 and 20 year government bonds in euro denominations taking advantage of uber-low record low european interest rates. coming up on the bar chart,
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hathaway. ♪
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>> welcome back to "on the move." let's bring you up to speed with the top stories. china has lowered its growth target to 7%. is the lowest -- it is the lowest growth target for the nation in 17 years. it prompted the nation's second
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rate cut. on saturday the shanghai composite fell 1%. the euro is that a seven low against the dollar today. the move in the currency comes as the ecb holds its first meeting and now it is a central bank's 1.1 trillion euro q we program. we will cover the press conference at 1:30 london time. the central bank lowers borrowing costs to the second highest since 2009 erin it's the fourth -- 2009. it's the fourth straight meeting they have raised rates. those are your big headlines, "the pulse" is coming up at the top of the hour, guy johnson joins us now. i think it is the seven-year itch for the bank of england but
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apparently it is the six-year anniversary. >> we will look whether the bank is actually going to do it but how take a problem they have at the moment given the fact that the central banks around the world are generally cutting rates at the moment and you have a deflationary story. some great co's joining us as well. disappointing data out of germany on the factory orders front, we get his take on what is happening plus we will talk more about driverless cars. we will talk to the standard bank's ceo out of johannesburg and the reinsurerer. as a result in this negative yield environment how are they affected by what druggie is doing -- draghi is doing. >> have a great show and thank you very much.
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stay with bloomberg television because it is all about the central bank today. full coverage over the news conference drop the morning. ♪
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guy: details from draghi. the ecb president set to finalize the bond buying program. francine: another investigation at the the oe. prosecutors probe liquidity operations conducted during the financial crisis. all this as governor carnies delivers the interest rate decision at noon. guy: china downgrades growth. the premier sets the target at around 11%, the lowest level in more than 15 years.


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