tv On the Move Bloomberg September 14, 2015 3:00am-4:01am EDT
the fed. caroline: happy monday, jonathan. it will be once again a week dominated by concern in china. what does it mean for the u.s. in terms of potential fed rate hike? let's have a look at where we are opening up this morning. basicallyed picture, slacked on the 5100. a little bit of caution -- up a 10th of a percent. it is the overall selloff we are seeing in china that is slumped. we are seeing a 3% drop of the shanghai composite and we will be getting over to asia shortly. that is about $80 billion wiped off the market valuation of the shanghai composite. what does this mean for growth when you see the numbers and industrial output, investment? dax opens 1/10 of percent lower. there will be in effect on the rest of the market.
copper is trading lower once again as concerns about chinese slowing growth prop up. similarly, trade and the u.k. is off by half a percentage point. no end to the woes for commodities going forward. interestingly, the other thing on investors' minds is the fomc. we have-day meeting, seen the dollar drop off by 2/10 of a percent. we would see any sort of rate hike come september. those futures funds tend to signal a 28% rise likelihood of the federal rate hike come september. much more probability later in the year, but money is being taken off the table when it comes to the dollar. on the flipside that is where you were seeing most of the trading. the euro is up some 2/10 of a percent, not music to mario draghi sears. -- draghi's ears. we have some interesting stories
out there for you. one is in focus because of talk about the strategic reviews that could be coming as soon as october. there is a rice discussion in the market about whether they could the uploading a u.s. private banking unit. all eyes are ahead. visuel is up 3% and we could see the private media companies and friends rally after a big government u-turn. there was talk they could reintroduce evening advertising on tv. with a destabilize the media companies in terms of revenue flows? but they backtracked saying they would not have using television ads. meanwhile, pearson is up 8/10 of
a percent. that was after a fantastic interview that has been written up. are selling their stake in penguin random house. they will probably not auction until 2017 so the ceo tells francine. but overall, pearson is driving high. jonathan: they give very much. three minutes and 12 seconds into the session. this is the european market open. in asia, the moves made sense. the shanghai composite slides lower. let's get to zeb eckert in hong kong. day in started out the the opposite direction, where it didn't make sense. we started with stocks higher on bad data, that that is not how we finish of the shanghai composite. it is down now, under 3%.
it is certainly reflecting investor concern that china's economic slowdown is deepening, and this complicates the situation for the chinese policymakers, because they are dealing with multiple issues and calibrating their policy response. it is not an easy thing to do. some of the movers in hong kong -- life insurers advancing. the hang seng was leaving the asia-pacific market, registering again on the regional benchmark. the casino shares are among those declining. at the end of the day, we have chinese stocks declining the most in three weeks on the slow down concern. we did see a big move in the japanese market. .he nikkei 225 moving lower bothireless division are declining as the prime minister indicated he wants to do something about high mobile phone charges for consumers in japan, perhaps bringing them more into parity.
to telecom are moving. toshiba is posting a net loss, slipping to the lowest in 12 years. here's how toshiba performed ahead of those numbers, the stock down 2%. this is the stock that has been beaten up year to date given the accounting issues the company has faced. it is down 40%, posting ¥11 billion first quarter operating lost. jonathan: thank you very much. here in europe, that is your market open. here's what we have lined up. the fed -- will they go one day? -- will they or won't they? the debate on whether they will raise the rates. we will bring you the latest comments from wall street. a: 30, europe's refugee crisis. germany has reinstated its
border controls. later, oil bulls back? the most bullish bets since april on optimism, with the global oversupply will disappear. . we will talk about that later. let's get over to china the economy is still growing slower than the government target of 7%. industrial output missed forecast on sunday. investment was a much better. bloomberg's bureau cheif is standing by. reactionis a knee-jerk -- we ask the question whether it means more stimulus is on the way. are we going to get more stimulus? nick: i think it is pretty inevitable at this point. there is broad expectation for another interest rate cut. if you look at the numbers that just came out, they are worse than they appear. at 6.1% bututput is that is skewed upward because
the number from last year, which was quite low. it looks better than expected. inflation numbers from last week look relatively positive, but those were skewed by high pork prices and other foods. overall, the picture is looking worse than people think, which certainly will put new pressure on policymakers. they have plenty of tools -- it's a question of when they will use them. jonathan: that is the big question -- going forward, talk a lot about reform. some details in the last when he four hours -- how significant are the changes? nick: it is pretty big. soe reform has been a key thing the government wants to focus on. they have made no secret of their intention to reform soe's. and are written with waste overcapacity and overlap between companies, so they really want to narrow this down. the tricky thing there, though, is that the government really wants to maintain the privacy of the communist party in
overseeing soe's, so the big challenge going forward is how they will maintain the balance. role,he market a greater but also allow the party to maintain its controlling handove over soe's. jonathan: great to have you with us. time to bring you the market. we are joined by the global asset allocation strategies that ubs. also the director of asset allocation research. great to have you with us. i will go straight to a quote from the bearish bank of international settlements, "we are seeing a release of pressure that has gradually accumulated among the major full lines." that tells me that this unwind, this shakeup, is going to continue. do you agree? >> i think a lot of our clients are certainly concerned about what will happen.
if we do see markets disrupted, they will step in and look for the value after the selloff. the volatility is not over -- i think it will continue and i think the fed will drive it further. china probably will stabilize, but over the short term, definitely -- this is high volatile. jonathan: we asked the question -- what are we pricing in? you look at a slow down, people looking at the next five chapters. next 20 turned to the chapters. how do you model what china looks like in 10 years? >> we have looked at all the other asian tigers, and of course there is the famous middle income trap. china in many respects is no different. it has slowing demographics in the outlook over the next 10 -- i is more or less proof can get my head around the fact that people are thinking 6%
growth -- what is growing? where is it coming from? there are so many indicators which are at -10%, -20%. jonathan: where is the growth coming from? ramin: my concern is about the ppi inflation. things like pork prices, vegetable prices. if you take those out, it has been fairly flat. ppi is what's really been falling. it is the price of product produced at the factory gates which is falling very sharply. obviously, the manufacturing sector is suffering in china. for not housing related industries -- things like leisure, luxury goods. but we have been keeping well away from that market. jonathan: a pileup of debt, data that points to inflation numbers, do we just assume that the next 10 years is just a
world of global disinflation? christopher: for all countries in the next 10 years, there is very little re-inflation pressure. there is evidence behind that -- if you cast your mind back, it was one of the biggest spending splurges on record. they were borrowing record amounts. there was still no inflation, even back then. even if you are in a world where those same entities are not spending, first inflation going to come from? jonathan: where, and what will the policy response be? the boj is meeting this week. have reallyple penciled in saying -- we could get more from the boj. is that a reason to go long on japanese equities? ramin: this disinflation theme is a big run for us, and we think the best place for looking for value is places where you have low-inflation combined with a positive credit impulse. andle are borrowing more
the economy is going to be fueled by that credit growth. the two places we see that is japan and europe. that is why there is fear among strategists. i think that disinflation feeling is the big one. jonathan: the nikkei 400 -- why that particular index? ramin: we like it because of the corporate governance aspect. our asian equities strategist just came back from a trip to japan. he has confirmed that for the stocks you have identified, they certainly seem to be taking corporate governors very seriously. what does that mean? it means you focus on return on equities. in order to be part of that index, you have a kind of cap. --athan: a long-term play short-term volatility in japan is outstripping what is happening in the equity market in china. you have to have a long-term horizon to appreciate what going to happen. christopher: i think one of the issues with japan -- you think
about the legs of the trade, a weak yen, corporate government reforms, boj action. the weak yen has stopped a depreciating. the corporate government reforms are ongoing. boj action has settled for the time being. only one of the three pistons is working. it is not surprising to me that the boj would start to wobble. jonathan: they will stay with us. coming up, one of the most anticipated market events this year. we have been talking about it all year. we debate the fed, next. plus, he may not be another majority which -- he one another tennis match. details on it after the break. ♪
jonathan: good morning and welcome back. let's get straight to your top stories. chinese stocks fell with the benchmark index dropping the most in three weeks. the economic slowdown is deepening. industrial output missed forecasts while investment increased at the slowest pace since 2000. australia's prime minister tony abbott is facing a leadership challenge, former cabinet minister. he resigned this morning, saying that mr. abbott has failed to provide the economic leadership the nation needs.
place, theas taking world's top money managers played in the first finance cup. that is where the hedge fund titan won a respective doubles event. they sweeps the european squadron eight of the nine matches. the next one will be held during wimbledon. central banks have a big focus this week. the boj will announce monetary policy at the end of the two-day meeting in tokyo. on thursday, the swiss national bank wil is expected to keep the rate unchanged. the only one that matters for many of you -- the fed. one of the most anticipated events this year. will the fed pulled the trigger and raise rates for the first time since 2006? that decision is thursday at 7:00 p.m. u.k. time. wall street is divided on what the fallout of any move might be or when a rate rise will happen.
here is what they have been telling us. >> i think the domestic case for raising rates is solid. it has been for a while. >> we are not in a recession yet, but the vector is in the wrong direction and that is unusual. >> people want to get off this zero bound. >> we are effectively in the end zone and these clowns are sitting there debating whether or not we can let the -- >> i have a lot of trouble with this idea. let's do it now and then we will hold our breath and leave everyone. of zerod year interest rate has and created a web economy. >> in a world where there is no inflation the idea that you hike interest rates just because they are very low in that worries us doesn't seem particularly compelling. a the domestic case remains strong with the international cases flashing yellow -- be careful, be careful. that you really don't know you have room to raise it for a
while, why are you starting now? let's bring back in our guests this morning. atin of ubs and christopher, burring. ramin, the labor market -- what if i want to normalize? inflation in consumer prices saying wait. communications are all about transparency for the last six years. has something gone wrong? ramin: i think they have been very transparent -- you can see what their views are. fomc the members of the say they will be a hike for the end of the year. i think if we do it in september we still have the optiona lity. it is also good to get it out of the way. particularly emerging markets will benefit massively. if you worry about outflows, it has been brutal.
that is largely driven by this uncertainty. the sooner we get it out of the way, the better the market. but i think the case for it is weakening. some of the data we have seen has been soft. i can see -- it is 50-50 for september. jonathan: coming into this meeting, they have had to tighten. goldman sachs was pointing to the fact that we may have already had the equivalent of 325 aces point rate hikes. let's bring that chart up for our viewers to show that goldman sachs index. you can see it pushing higher. does that play into the fed, and how much is a problem for that for them? every time they talk about getting on zero, the market pushes them back. christopher: there is no need for them to hike -- there has already been tightening for financial condition. in the at the ford curve inflation market and they will show you there is absolutely no inflation anywhere to be seen. in terms of the fed signaling
that there should be a hike at some point this year, they were also expecting some wage gains to come through. the midpoint of the area estimates and there is still no wage gains to be seen. something is wrong in their models. jonathan: so they change the models? christopher: and they drop the plots. all rates have to come down. there isn't nearly as much of inflation in the system, nearly as much likelihood for wage gains. jonathan: let's talk about markets. why does anyone care about a 25 basis point hike? what does two or three months even matter? a lot of the big words are be on that. for thisno guidance kind of monetary policy anywhere in economic history. when you go into a meeting like this people say -- how does history not tell us anything? ramin: i don't think it is impressive compared to where we are now, but we have thought
about this for so long, hike is now largely private. so one your outward forecasts will be 110. euro strengthening versus the dollar, 5%, 6%. we lookhe cases where for weakness, where you have open markedness, exposed to this dis-inflationary trend. that is where the currency will take the hit. stoxx. extent, also the those other currencies we would sell. jonathan: i am going back to your decade outlook, your report. look at the federal reserve -- you mentioned the imf as well -- consistently overestimating growth. getting their forecast wrong. if we can't trust their inflation will growth forecast, why do we pay so much attention to the. plot when it comes out? christopher: good question. frankly, the federal reserve, the imf, many mainstream
institutions have been completely overestimating. they have been taking the view that brought us back to levels above that which we saw in 2006, 2007. we saw so much spending, so much capital being put into the economy, and still no inflation. they have for some reason thought that productivity will bounce back to those levels. i don't see it. i think they are coming under political pressure. maybe not explicit, but implicit pressure, to say things aren't thatbad, to say things -- the trend growth will recover. there is no evidence to show it will. jonathan: of course if they don't forecast inflation targets in the medium-term, they are failing in terms of policy. the central bank almost predicts what they are meant to do, which is a problem. that is a problem for the bond market as well.
bond markets always underestimate growth inflation. we have to take the debate -- we are at 2.2% now and are we about to get the bond market wrong all over again? ramin: we have done for fairly elaborate models. all four of the models, based on theut, are telling us that terminal rate will be somewhere around 2.9% or just below 3%. if you read into the five-year, that is telling us it should be somewhere around 3.2%, plus or -60. we pay at the bottom end of that range, but that is the forecast for where we think rates should be. i think that is the key thing because you have to have an idea of where the terminal rates will be. none of the dot plots will determine rate. jonathan: let's wrap this
conversation up. we have a decade outlook but let's do the here and now. have you imagine thursday? christopher: before thursday you want to assume there is no hike, and if either there is no hike you should see a rally. ramin?n: ramin: there is a very good book called "invest in fear," and that is what i would be doing. jonathan: ramin, christopher, thank you for joining us. 25 minutes of the session. a bit of a rally -- you'd think people would stay away and things would trade flat. that is not happening. the 5100 is up by 1.2%. the shanghai composite is after somen by 2.7% not so pretty data. switch up the board quickly for a check on the effects market.
jonathan: good morning and welcome back to on the move. i am jonathan ferro. 30 minutes into your trading day. let's check out how the markets are shaping up. .8%. 600 up like it green across all of your this morning -- across all of europe this morning. was tied by media companies. one of the leaders is key f1. -- is tf1. outperforming the rest of the stoxx 600 this morning. there was talk that there might be introduction of advertising in the evening on a state owned
the media. how would that affect destabilizing factor from media groups. it is being unwound that decision. driving their privately held media companies and france higher up 7% at the moment. swatch up 2% this morning. .he maker of luxury watches very bullish on china at the moment. he is speaking to the swiss press saying the brand is a growing 50% in mainland china. ther brands are growing in single digits. he sounded very confident on china. comingnating composition about the snb board. the swiss bank is massively overvalued. very dominant and explosive stuff coming from the cfo of sports group.
market isn't all in gains. 2.4%.to is down it's about ships. ships you use in your mobile phone. a lot of stocks moving on the back of brokerage. have a rally in europe. on one stock in the ftse 100 is in the red. i will keep you updated throughout the morning. in mainland europe, the big story, european union justice and interior ministers are inting today to take refugees. here are the details of the plan. >> the european commission has made plans to tackle the refugee crisis by calling on governments to relocate 160,000 people. --increase of 200% since the
currently, that applies to syrians, every chance and iraqis. eritreans and iraqis. just would take the least, 133. participatings, member states would receive euros. -- they willary, get 500 euros for each person relocated. three countries are able to opt out. for those opposing the quotas, like check republic, the penalty would be a force relative to the size of the economy -- boat up the size of the economy of the
country. germany has restored controls along the border to austria, effectively suspending the shanking agreement -- the schengen agreement. the interior minister spoke in a meeting on sunday. >> at this moment, germany's introducing temporary order checks again at the internal frontiers. the focus will be at the border with austria. the aim is to limit the influx to germany and come back to an order. this is necessary for safety. let's go over to hans nichols in berlin. germany made this a moral argument. the lid to school reality hitting germany and the economy in the last week. does that mean it has failed already? hans: you are hearing
blockhe anti-merkel within her party. the consequences that we have, 21 thousand refugees heading into austria is one village in austria. it is on the border. these consequences are a natural side effect of merkel's call last week. that is what you're hearing from some of merkel's critics within her party. he was making that case earlier on television. whenumbers are staggering you look at what is going on. 12,000 into germany over on saturday. they are expecting 20,000. those numbers are going to have to be reconfigured. a shutdown rail service -- they shut down rail service between munich and austria. that is been opened this morning. tracks are not running smoothly. on the tracks. we do not have confirmation on
whether or not those are refugees trying to make the walk from the anna to munich -- from the anna to munich. i suspect we are going to have masses of people lined up later e.day on that main rout here are what the austrians are saying. we will continue to coordinate closely with germany to achieve an orderly situation. the refugees should not be the one to suffering. they should not lead to chaos. building their defenses along their border. what we have is they see a recognition that what is happening is not feasible. they can't absorb all of these new refugees. it is a message to the european union. the trade, the commerce, the entire eu could be under threat unless there is some hand-european solution. pan-european solution.
tim: we are getting a headline that according to the road operator, austria has closed the main highway to hungary. their meeting later to finalize reassessment plans. what can we expect from that? is the story getting ahead of them? on skull whatever happens -- , thato whatever happens won't be sufficient. the numbers alone indicates they are going to need a lot more than 106,000 resettlement within european. 160 is going to be a difficult goal to achieve. they had a difficult time getting the 40,000 a couple of months ago. , i'm notd increase sure how they going to find the political will. the story today is going to be about pictures of the
austrian-german alps. we have seen the military situations in hungary. that is moving west, closer to germany. the picture will be the same. jonathan? jonathan: odds nichols in berlin, thank you very much for making that down. the uk's opposition labor party announced its new leader on saturday. with a landslide victory, jeremy corbin, he received 60% of the vote. hasthe results, it triggered the partners. -- it has triggered departures. yeah -- we first must about what jami thinks about the world. we have this refugee crisis. at the same time, somewhat of a eurosceptic.
svenja: the labour party hasn't always supported absolute membership of the eu is membership of the eu. told is that he would not guarantee campaigning in favor of staying in. they could be one of the many divisive issues that could split the labour party. jonathan: they're not they are sharing cabinets. what does it mean? man who makes some of corbin's policies moderate. removing the bank of england independence nationalizing the banks, re-nationalizing the railroad days he is a very controversial figure.
he is a friend of jeremy corbin. his appointment is going to go over very badly in some circles. jonathan: this raises the with the farat left of your party, what about the u.k. electorate. what does this mean for the next election. when we start to see this in the polls. -- he hasa poll appointed some centrist -- he is not only going to play badly, last time around, they felt the handling of economic policy was whole to -- we have a wave of voters now. we don't know where these are going to go. where many of the mps are going
jonathan: good morning. 44 minutes past the hour. let's get to the top stories. chinese stocks bow with the index dropping the most in three weeks. the economic slowdown is deepening. output missed economist forecasts while investment increased. australia's prime minister is facing a leadership challenge from a former cabinet minister. he resigned this morning, saying he fails to provide the leadership the nation needs. >> the prime minister has not been capable of providing the economic leadership our nation needs. he has not been capable of providing the economic confidence the business needs. junk of the u.s. open was taking jonathan: while the u.s. open was taking place, some of the finance ministers
eight of masters -- the nine matches. next year's match will be in london during wimbledon. let's get back to the market and have a look at the oil market. in focus today. opec publishes its monthly analysis. -- oil and gasts output from the biggest sale formations. most funds have added the bullish picks since april. the global oversupply will disappear as if reduces -- as it produces slow output. there was a big difference between me being bullish and thinking oil comes from south of 52 north of 100 again. look at these prices around 44th dollars. is that the story? long is a lot easier to go when you don't see the brand price.
when we are at $75. i will not take the ecp, the end of the gloom for oil prices. noge funds believe there is downside to the current prices. jonathan: i saw andy hall speaking last week, here is a man who knows something about the oil market. what is the story with him? -- javier: heier made $100 million a year. he knows one or two things about the oil market. he believes the current price is so low, we are destroying potential supply. the international energy agency drop byt year opec will $100,000 a day. that is the biggest drop in 24 years. come the end of next year, we're going to face surplus is a lot of
that were going have to go through. jonathan: you have to strip down what is happening in the u.s. who is still around 9 million barrels a day. going forward, if i'm looking at the oil market and i see the huge swings. what is the catalyst now? shirley opec coming out with a report that we expect the same thing over and over again. what am i looking at? javier: you need to look get to keep points. one is iran. iran is going to be coming into the market. how much oil. they are going to shape a lot of views. the second is when we see real .rops in production in places the u.s. is one. we have seen india production drops. russia, and other big production areas.
the moment you see the fed monthly data, that is when you could go long. royal, goldman sachs on friday. you speak to a lot of people in the oil market. what was the reaction? javier: that's the potential. it grabbed the headlines. goldman leaves is going to happen. bloombergs chief energy correspondent. thank you for bringing it down for us. with tom alan. more after the break. ♪
that is a huge opportunity for the financial times. it means it can reach journalism to more people. well. great challenge as it has to make them rethink how it makes and sells journalism. jonathan: that was john fallon talking about the company's financialo sell the times to nikkei. he spoke exclusively to francine lacqua. that is coming up next. great to have you with us. .he former ceo it's not getting sold. it is not getting sold. the rumor kept getting turned down. why did he do it? caroline: he was very candid. we just were not giving it the right home. if you look at what it media has become that's if you look at what media has become, you have --figure out what questions
the on demand that the man's huge investments. he says it was a good time to sell. just because we don't want to be a part of the story, ft needed a good home. they want to focus on education. jonathan: and look at the interview, and i pull out some of that news. the other units -- a lot of speculation. caroline: they own penguin and random house. this is a joint venture. it has been doing fantastically well. 95% of revenue. a lot of people say strategically it doesn't make sense. me penguin random house makes so much money with so little investments, it would be crazy to sell. was not interested
in 2016. they said they would like it. it's up for sale, we will take it. jonathan: we speak to strategists about will the global economy, specifically china, when we get a ftse 100 ceo, and we want to know what they think. the guy is investing in the economy. what does he think about what is happening in china right now? english language for a lot of chinese businesses. he is quite exposed to china. he believes his business will continue to do well. whether you have a recession or not, people tend to invest in early education, especially if it's online. he is worried about turmoil in china and will continue watching it very closely. tucker what do i need to watch on the pulse -- jonathan: what
do i need to watch on the pulse? francine: i have two interviews. that model is rivaling going to sigma. the mayor of london is on a trip to china at the end of this week. electinghave labor jimmy corbyn, what does it mean for london? if you are an investor, you may be spooked out. jonathan: if they get into power. francine lacqua, watch the pulse. european equity markets in the green. we are so high. ftse 100, where up .7%. up zero point -- the euro erases the day's gains at 1.38.
francine: chinese stocks drop the most in three weeks. confirms the second-largest economy is slowing down. europe is ahead of this week's frederick. the deal comes under pressure as --many region duces controls reintroduces controls along the border with austria. newly elected u.k. labor leader jimmy corbyn alexey hard left winger -- elects hard left-winger. ♪ welcome to the pul.