tv On the Move Bloomberg August 31, 2015 3:00am-4:01am EDT
we down by 77 points. ftse 100 futures -- no action on the footsie. a couple people here enjoying a bank holiday. someone who isn't -- caroline hyde. caroline: no rest for the wicked. $5 trillion wiped out of global markets over the course of the last month and it is set to get worse today. the two key issues in the minds of traders -- china and the federal reserve. will china prop up their market as they lead into this victory parade later this week? the jury is a bit out. risk aversion. key central bankers over in jackson hole, the ecb, the bank of england and the federal
reserve not too worried about inflation. dax up bying the almost one percentage point this morning. 0.8%.rly the cac 40 up by we are also seeing once again the euro playing a bit of hayes and trade. clearly there is money moving into the europe and yen as well. we will hear from zen becker in asia. the correlation between the yen and the euro with the highest correlation since 2007. both seen as an area where to put your cash when you want safety. copper is lower and oil is lower up by 1.3%. we are at $44.5 at the moment. glut butstill a supply
more rigs coming online in the united states. the demand on the flipside doesn't look too great. let's have a look at what is happening in terms of the bond markets playing out. money going into germany and the united states. meanwhile we are seeing borrowing costs rise a little bit and the daily check in on what is a very illiquid market and lastly, to check in on some of the big stories. up.have eddie coming the biggest find in the mediterranean. to 5.5y it could be up billion barrels of oil and it gets to push higher. ofld the infrastructure arm elian's the -- allianz be
gearing up? meanwhile, volkswagen down boy 0.6%. probably we are sing the concern about growth in china veering into the car market but there is an interesting pick up. they will be getting about $3.8 billion from that 20% stake they are selling in suzuki motor. jon: cannot miss that interview with the ceo in about 30 minutes time. equity markets are a little bit iner and the dax down 0.8% the cac 40 down also about 0.8%. let's get the asian market rat with zeb eckert. stocks extending the biggest monthly decline in three years today. china continues to be the center of the conversation and is
impacting all of its neighbors and trading partners. there are questions ahead of tomorrow's manufacturing numbers and the rba decision. we also have the aussie today trading at a six-year low. that is a currency we're watching very closely. the nikkei 225 is lower because the yen is advancing ahead of those chinese manufacturing numbers. investors are looking for safe havens and they are high -- piling in the currencies like the yen. output industrial numbers for july which came in worse than expected and japan was out this morning with industrial production unexpectedly declining. headwinds for those economies, japan in particular. here and hong kong and shanghai this is what we have three the hang seng index higher at the end of the day and banking
stocks focusing on a particular because some of these chinese banks are really astonishing. they have an earned any money so far this year and it tells you the extent of the issues in the chinese economy. let's look at the chinese brokerages because they have been moving significantly with chinese regulators taking a closer look at insider trading with some of the securities, none of them named and among these brokerages this is what you are seeing. should choose financial services. it looks like it doesn't want to cooperate which means these financial service securities firms, civics securities, big security players in china being told to support the market and being looked at for possible insider trading. we will get the board to work one of these days. eckert, thank you very
much. in the diary in black ink is the federal reserve's next meeting. they have world market volatility and sluggish global growth to consider. apparently none of that will to turn the federal reserve. that is the takeaway from the jackson hole retreat. >> the key question for the committee is how much would you change the volatility based on what we have seen over the last 10 days. the answer is not very much. >> we should be telling a coherent story that we are not about what happened to last 10 days on wall street we are trying to shape inflation and employment in two years. >> we should expect some volatility. what it means for monetary policy is not yet clear.
i am not ready to say it has long-term effect. has signaledomc that every meeting is going to be a life option and in between we are judging what shifts have occurred that would change the forecast. for me i have not seen something that would change my own sense of how the economy is doing. >> i'm looking at all of the data including the volatility of the financial markets and at thisin new forecasts september meeting. my view so far is that the economy can sustain an interest -- an increase in interest rates. >> we see the distance that we have traveled, as well as the current outlook for the economy. both of those would suggest to me that we are close. the timing is close.
they were some of the fed officials we spoke to over the weekend. the most anticipated event of the weekend was a chance to hear from stanley fischer. he struck as hawkish tone as many of his colleagues. he said that while inflation remains low, there is good reason to believe it will bounce back. wait untilt inflation is back to 2% to begin tightening. let's get the investor take. global market strategist at j.p. morgan. i want to read what you said to me on friday before this interview. intoaid that hiking september would likely be viewed as a policy error while delayed you would be seen as a problem. told you expect the fed
match a delay with modestly hawkish rhetoric. is that what this was? the federal setting up to delay rate hike maintaining discipline for the market? >> the hawkish tone was definitely there. i didn't get the sense that they were trying to explain that they were delaying the rate. to me it was surprising the upbeat tone of central bankers and jackson hall and their confidence in boosting inflation. when i look at market anticipation i do not feel the inflationary dynamic is there yet. if you look at five-year inflation swaps you see they increased extensively but lost almost all of the gain during the summer. you'll see the selloff in inflation bonds.
i can acknowledge there might be some inflationary dynamic in the u.s. although wage growth has but elsewhereting in japan and europe -- we are far from their. the ecb will likely have to revise its inflation forecast down, meeting the september 2016 deadline for the end of qe, will probably have to be extended because we will not be close or below 2% in september. dynamichis inflationary is still stronger than the inflationary pressure. to me it doesn't pave the way for a september rate hike. policy. exports monetary and has to look at development in the world. it is true that what occurs in wall street is not so important
for the fed. more than wall street just the volatility around emerging-market currencies and of the weakening growth which should be at least in the scorecard to the fed. jon: you don't think there will be a hike next month. when i look at market pricing there is a 38% probability next month. do you think it is lower than that? probability of a september fed rate hike is lower by the day. when we see the development this week also what is taking place probably bet will taken into effect, but i do not expect a fed rate hike in september. a policy,it would be given the volatility and weakening global growth.
to me the end of year for the start of next year would be much more reasonable. even from a u.s. perspective you might say that there is still an argument to make to delay this rate hike. it is expected to be strong again but more importantly we have to look at the employment index which surprisingly dropped 2%. dynamic toto see a expect a fed rate hike sooner than what market is discounting at the moment. jon: as a final question, we are having the should they -- should they rate hike debate. let's have the will they-want they -- won't they? when i see a rebound in the back half of last week, is that nothing more than a bear market
rally? if they move in september does that set us up for another downturn? >> from a european-u.s. thatective, i believe markets and economies can perpetually digest a slightly higher interest rate economy in the u.s.. we have looked at the fed rate hike cycle in the past. you see a strengthening of the dollar. more volatility but the market is still doing well and a flattening of that you curve. enoughve this is strong to digest the fed rate hikes. when you look at the earning season you see that u.s. companies did well and we have overruled earnings growth of roughly 5%. when you look at the eurozone it an even stronger with
earnings rise of 20%. you can see the corporate dynamic is really strong and valuation definitely after last , more in linef with the historical average. from a graduation perspective and an earnings perspective, i believe markets are well-positioned to digest the fed rate hike. and the fed has already said many times in the past that it will be very gradual, and obviously we will try to manage expectation. i do not think it would be a but the events of the market of the last days to its us a flavor of what we can expect in the coming months. 2% moveto get used to a per day which we have not seen over the past year. jon: thank you for joining us this morning.
tv. let's bring you up to speed with some of the top stories this morning. at the annual jackson hole retreat fed officials said they intend to stay on course and hike rates. stanley fischer said that inflation is poised to move upward and said the fed shouldn't wait for inflation to hit 2% before beginning tightening. the monthocks ended down about 12%. the index held today as traders weighed the leverage of support after the industry was called to contribute another 100 billion u.s. to another market fund it the italian energy firm eni has discovered a quote supergiant gas field. iny say is the largest find the mediterranean sea and may hold 30 trillion cubic feet of gas which would be equivalent to 5.5 billion barrels of oil.
globalet prices and markets are not right. that is the message from the reserve bank of india governor. mike mckee and brendan greeley caught up with him to kickoff the conversation talking about growth and whether central banks have pulled their weight with policy. say it would be better if we grew faster but i would also say that central banks are pretty much done with they could do. none of you that is universally held by central bankers but i think in general, across the world, central banks have done what they are capable of and now others have to step up. whether it is through structural reforms or fiscal policy. but those might be the sources of fragility we have tried too
much and as a result, in certain asset markets, prices are not correct and they may correct. whether that happen smoothly or in a volatile fashion is anybody's guess. secularu believe the stagnation argument? >> i think there is some validity to the fact that we are previouswly because of -- compared to previous recoveries. is it all debt overhang? i don't think so i think there is something else going on. i'm not sure if there is a more long-term factor. you would hope that we would find some way of monetizing all the good stuff that is happening and later edit to gdp and find that we are growing strongly. jon: that was the reserve bank of india governors speaking to
the future of innovation and growth in india's economy. alian. sing in i will come to inflation and just a moment but i want to talk about the concerns that governor rajan tried to rally. saying no country is really immune right now to the volatility in china. inflation has been one of the biggest concerns that he has faced here in india and in the past he has said three things, the u.s. federal reserve policy and inflation will be the factors he is watching when he comes out with his rate policy when deciding the monetary policy going forward and saying that the biggest change over has been tracking real inflation and
putting in place monetary policy to ensure inflation controls. ofseems they have some sort consensus on a new monetary policy committee. the governor is saying don't trust that you. jon: after the break, we will talk eni as they hit the jackpot and find a super giant gas field off the mediterranean coast. ♪
back to bloomberg tv. hasitalian energy firm eni discovered a quote supergiant gas field off the mediterranean coast. for more, anthony do fowler joins us now from dubai. what does it mean for any -- eni? for them this is a big deal because they are always looking to replace preserves. that means the oil and gas they find, produce and sell they need to make new finds all the time to replace that. that is one of the big metrics. so this is a positive step cousin they can replace those reserves. they will be looking for upside on the execution phase when they are able to bring production online and if they can find more
gas or oil in the field than they thought. ceo was speaking to some of the italian papers saying they hope to find the first fruits of the exploration some of theh means first signs of gas coming out of those fields and potentially they could get exports of liquefied natural gas going to italy. they have an export plant that has been idle because of a lack of gas. they will really be looking to leverage this for sales abroad. jon: the stock this morning up 3.5%. coming up on this show we will speak with their ceo about their discovery off the egyptian coast. join us and a couple minutes. ♪
jon: let's bring you up to speed with some of our top stories this morning to at the annual jackson hole retreat fed officials said they intend to stay on course to hike rates and stanley fischer said inflation is poised to move upward and said the fed should not wake for inflation to hit 2% to begin tightening. chinese stocks ended the month down some 12%. brokerages led the retreat after the industry was told it would contribute another 100 billion yuan to a market fund.
eni hasian energy fund discovered a quote supergiant gas field off the mediterranean coast and may hold 32 trillion feet of gas which is the equivalent to 5.2 billion barrels of oil. andinutes into the session let's get you up to speed on where stocks are trading. equity markets taking a little bit of a dive at the open. the ftse 100 closed today for a bank holiday. 0.1%.oxx 600 down the dax dropped into a bear market last week, down 0.6%. 0.7%. also down by the ftse mid in italy is up.
you. out the fx market for the euro traveling higher and lower throughout the session last week. it just 117 last week. almost 1.54 flat. those are some of the big moves this morning. houston -- have up upheld suzuki's request to terminate it agreement with volkswagen. nejra is here to tell us more. like suchthis seemed a mutually beneficial agreement to begin with. it would provide suzuki access to technology and give volkswagen access to a wider role in the indian market and together they would cooperate on small, fuel-efficient cars for the emerging market. they made it agreement in 2009,
just two years later relations soured after suzuki agreed to buy diesel engines from fiat. trust was lost in both sides started accusing each other of breaching the agreement. finally after four ears of disputes they have agreed to sell their stake valued at $3.8 billion. i am satisfied with the outcome of the arbitration process. it is like removing a small bone that was stuck in my throat. i feel refreshed. i don't think you would remarry somebody who you divorced. >> you can see it is a little bit of an acrimonious split. even in ending the agreement they are still at odds. suzuki has said that volkswagen has to shell -- sell its shares
back or so into a partner. volkswagen says the buyer of the stake has not decided yet. also, suzuki may have to pay damages. japanese arbiters said they had agreed -- breached the agreement. you can see that what was such a promising agreement has ended quite bitterly. jon: that is one of the movers we are watching this morning. for the other top stories let's head to caroline hyde. caroline: there is one particular stock that sums up what we're seeing. oil and metals on the slide. valourec really -- really summarizes that nicely. you are seeing fellow rack one
of the biggest -- valourec one of the biggest faller's today. and interesting comments coming up from one of the key shareholders. of rwe and they think that 2013 dividend will be slashed in half. in -- when the big shareholder is talking down the dividend, the rest of the market listens. rwe one of the worst stock performance today and on the in the green, leading the charge as the italian company finds what they call a supergiant natural gas field offshore. even though we are seeing oil gas commodities continuing to deteriorate it seems that this
company is outsmarting the market. pleased to say we can bring in the ceo of eni, right here, right now on the phone. just to begin, that's get a timeline for production. when does this come online and when do we get the first production from the field? guest: who will try to do our best. we just finished the operation soon we will try to start by the end of this year and chilling in -- drilling in january or february. time to market and a couple of years so -- jon: funding the development -- how do you intend to fund that? do you have the cash or do you have to rivet? guest: -- raise it?
guest: these developments will not be very expensive. it's anof our strategy, immaterial cost to our facility the development will be mainly drilling so i think it will not be a problem to fund without equity these projects. jon: claudia, can you give me some size and scope. you call it supergiant. when you look at mozambique how does this shape up? guest: mozambique is the biggest discovery ever. considering the , is the fourth discovery in 10 years. it is a worldwide discovery. eni and other companies
have had difficulty getting payments on time from egypt. are they paying now? and thisypt is paying discovery will put us and a stronger position. iswe have a standing that $500 million. it is clear with the discovery and the cash flow and the possibility -- it will put our company in better position than in the past. jon: let's talk about the recent past. you had the cut the dividend, how does this project fit into now?can you support it guest: i think this discovery is an organic discovery, and it will impact it positively.
clearly that we are the only company that took out flowividend that is a dividend. we don't need to reduce it any further. that discovery is going to improve our position and make our position much more robust. i think that is very positive news. jon: i want to talk about the development in the oil markets. over the last couple of months you had a dip toward $40 per barrel on brent. the print curve has also gone much lower. we had a real short squeeze. in your mind, is that still in tact or is this rebound encouraging you that we could
get a move higher? guest: from a price point of view i am not very concerned. we think for the next couple of years we will not have a very high price. we will have ups and downs in 60 range of very low, 50 and dollars per barrel. in efficiencyone we'reerating cost -- always aiming at organic growth. think i don't have concern from our point of view. i think this will last for some time but because all the companies are cutting and reducing investment, we will increase. i think that in the future the price will be higher than that.
jon: as a final question, when you look at the divestment, to streamline the company, does that change the strategy? guest: it is not changing our strategy at all. we continue with our strategy of disposals. we clearly said this is a transformational discovery that is going to create more of a balanced balance sheet and more cash flow, but it is not to change our strategy for the fuller -- four-year plan. jon: thank you very much for joining us this morning. cap's up, the shanghai its biggest two-month drop since the financial crisis.
where are we in that right now? >> the government seems to be taking dual front approach. you see investigations announced into a legend manipulation. we know the -- into alleged manipulation. we do not the government has asked brokers to contribute 100 billion yuan into the fund bailing out stocks. e as week there was a paus the government reevaluated how it would work and then it seems to be starting again and encouraging brokerages to buy back their own shares.
jon: goldman sachs cut the forecast for china and beyond. what is driving the decision? >> this reflects what we have seen. i think industrial output is lower and you are seeing a lot of concern by investors. people don't know what the government is doing. there is confusion about what .he government's intention is jon: thank you for breaking that down. let's head to hong kong. he is the investment director at nab, the private wealth advisory.
we don't think there is a large downside for the currencies. reasons we are not seeing a downside in the currencies is because the pboc have been actively supporting the currency. is it just dollar-denominated assets they are selling? >> i think yes, the pboc has been intervening in the market, but these currencies are freefalling. i think the pboc is the and a major scale compared to what we are seeing, such as the u.s. fed and the ecb. looking at fundamentals, the current account is in the current level in the trade surplus situation is record
high. on that side i think support for the currencies is still there. i don't think we will see a lot of short-term developments from here. jon: it seems the equity market is divorced from the economy. they're slowing down because they are cutting rates back in november. there is so much activity or so make policies around to support .t china's equity market has performed quite differently. , thee short-term deleveraging and the corrections of the china-asian market is not complete. in the next couple months we
will see some overhang effect. i think the market has been momentum driven already. moree long run, we are optimistic about china's stocks, or even new york trading exchange. there are much less bubble situations. there has been a lot of talk that the pboc is supporting chinese equity markets ahead of a parade this week. what is the discussion inside china? do we just assume after the break that they allowed the freehand to take control? guest: the chinese government still has very much a controlled economy. i'm not sure this has been totally a bad thing but the western world is not
appreciating that there has been a lot of intervention in the stock market. on the other hand they have probably deregulated a little too fast. it is probably too much. that is why they tried to stabilize things. see it isideal influenced by the government. support isment understandable. jon: thank you very much for joining us this morning. we recap all of the big weekend action in jackson hole summit and preview everything for the rest of the week. join us in two. ♪
then stages the biggest two-day come back in five years. wti north of $44 a barrel this morning. tomorrow we get a rate decision from the reserve bank of australia, and thursday the ecb has its own rate decision and friday payroll. the most important jobs number ever. we say that every single month. let's bring in manus cranny. is the most month important jobs number ever but it is a little bit important. manus: it is, it is, it is. another reason to validate stanley fischer's comments. he said he would not assuage the market of their assumption. they will play out a little bit earlier.
the fed have gone from the -- 24 hours i should say. -- wirp, whichis is world interest rate probabilities. it comes down to the train you should be on. they say they are not worried about oil. i will talk to my guest in regard to oil and the dollar and rates. indian's barclays economy with us he will talk of india. for me it comes down to the most mishandled, misrepresented, cac ca id -- cac candid --
frenzythe volatility continues with global stopped set for their worst month in more than three years. that comes as federal reserve officials refused to rule out raising interest rates next month. september is still on the table. and pressure on two fronts -- protests over military policy and japan's industrial production unexpectedly slumps. welcome to "the pulse." i'm in london.