tv On the Move Bloomberg December 7, 2015 3:00am-4:01am EST
>> looks like we could have a bit of a bounceback this morning. today, we're expecting a bounceback. is here to stay. that is what mario draghi is talking about. just opening in the green. expecting the dax to open higher as well. we will wait for it to warm up. risk appetite is back on in europe. euro.have a look at the , but put it into perspective. let's have a look at what happened on the week. the biggest bike since 2009 on thursday. mario draghi initially
disappoints. now he's trying to ease that concern. let's have a look at oil, continuing its downward trajectory. on the day, he goes lower. why? goodbye to any production quotas. no longer defending price, more about defending market share. oil going lower. lower,lux will be moving yet to open, but pulled down by 12% as a ge no longer selling its appliances unit. back to you. out what'snds happening in asia. >> a positive session in the asian region. taking that the from the positive jobs report out of the u.s. on friday. we have seen the china market close higher.
some great gains coming through in japan. the nikkei up by 1%, led by moves by exporters. a disappointment in korea as the yuan weekend once again. global funds pulling their money out there. a switch out in new zealand. that crude oil slide is continuing below 40 girls -- dollars a barrel impacting the sector. monday, big movers on monday. origin energy coming under pressure. citic securities also following -- falling. thehat probe continues into
$5 trillion equity route we saw in summer. , thealia's real estate first real estate ipo and -- one, one dollar 83 dollar 83. really impacted by that faulty airbag scandal. it continues. a positive session to start the week in asia. >> what's happening in the rest of the show? first up, banking blues, barclays more job cuts, marine le pen's party taking the lead in the first round. the setback that represents for president francois hollande. plus, a record year for him and a -- mergers and acquisitions. ♪
>> mario draghi defending the bank stimulus plan. speaking in new york come about to take more action if needed. we have to intensify the use of our instruments to ensure that we achieve price stability mandate, we would. there cannot be any limit to how far we are willing to deploy our insurance. we will achieve our mandate. >> let's bring in our international correspondent in berlin. we have gone back-and-forth about this. there is an argument emerging that this was a victory? , he was one of the dissenters. he did nothing further easing was necessary. they lowered the deposit great.
what we know out of frankfurt is that 25 members of the governing council, five dissented. said, he considered that a large majority. the question is asked and unanswered, had mario draghi gone for a bigger amount, would he have more than five dissents. how strong are they and how many on the bubble saying, we will dissent more if there is indeed further easing. the size of easing the market was expecting. >> let me pick it up. one of the reasons we saw what we saw was the data are starting to get better. will we see more evidence this week? >> this week, we just got industrial production.
we will get the final read on the eurozone coming in at 1.6 modest growth. where it same debate we have been at for some time. , focus ons are saying core inflation not headline inflation. the ecb still's persistent overall headline inflation. the cpi debate has not changed that much. we still have the two sides talking past each other. let's bring in stuart richardson to get his take. dewey look through oil or not? -- do we look through oil or not? oil is trading softer. >> that's a big this inflationary force that will continue. -- dis inflationary force that
will continue. broadn we look at the data for europe, they've been picking up for a couple of quarters and we expect that improvement to continue. oil prices should be good for household consumption. you look at the cpi version? you can look at the overall health and see what's happening with gdp. >> the problem with that argument is that when you and up with wage rounds, people look at the headline level. this is what the ecb is concerned about. the headline number becomes the problem. in thets get embedded psyche, wage rounds, and you don't get that pick up. >> again, you have to manage the overall economy. when mario draghi wants to do it, he will say i have to meet my mandate. he spent the last 4-5 years to
do what ever it takes to save the euro and the european banking system. when we look at abroad european economy mix, we've seen an enormous benefit and consumption , but also the weaker exchange-rate. that has helped the economy and lowered inflation. as we move into 2016, some of these forces will change a little bit. oil may continue lower, the base effect may be that it doesn't go down as much. , notwe look at the euro going down as much as 2015. >> let's try to gauge the market reaction off the back of all this. bridgewater has come out and been punchy about this, the market got it wrong. mario draghi is just focusing on the objectives of the ecb and the inflation mandate. did the market get it wrong? i keep going back and forth on this. the communication out of the ecb over the last month set the market up for something
extremely dovish. the noise your hearing from the , thethe communication credibility question, does that argument resonate with you? >> and depends on when you asked me that, right? draghi'sasically mario point, the market will eventually get it. marketill judge the offer 24 hour time span, then it's a bad judgment. if we give it more time, eventually the market will learn to speak the ecb's language. eventually, you pick up the syntax come of the grammar, and the idioms. five-year-five-year. the market is saying five years out, we don't think the ecb makes its target. five-year, butr
would you did see was the five-year five-year decline, market expectations of inflation pickup. the reason the market was still staying easy was because of expected policy. they didn't deliver them. does that put the pressure on them again? to try tohi seems create for the governing council, does that still stay there ? i wonder if we go into the meeting and the qe is still on the table. valid -- all of these are valid. i we going to more stimulus? t think were getting a bi ahead of ourselves. the forecast were not genetically different.
2017 was slightly upgraded. there wasn't a massive change. he's delivered the something this time around. the should not be for january delivery. he's going to want to try to do more and get some firepower going and keep his powder dry and build it up. let's look at every single meeting is probably over the top. we have to look at the progression of gdp data. if it's improving, he will say we are doing the right thing. we have to see what will be happening in the next few months in the first quarter of next year and so on. our view is that things are gently improving. there is a credibility issue. himselfs trying to save in new york. he's maybe done a good first round, but maybe we will say. >> take a look at the dax this
jonathan: welcome back to "on the move". president obama described last week shootings as an act of terrorism. addressed the threat of terror at home and abroad. he called on congress to pass tougher gun laws. authorization new of force against the islamic state. they were no evidence directed by a terrorist organization overseas or part of broader conspiracy at home. that the two of them have gone down the dark path of radicalization, embracing a perverted interpretation of his long the calls for war against america and the west. they have stock. weapons, ammunition, and pipe bombs, so this was an act of terrorism designed to kill innocent people. >> terrorism and the refugee crisis also in play in france's
regional election with the far right national front party making gains. it has taken more than 27% of the vote, followed by the --ublican party, intro by and trailed by the socialist. soaring inflation and unprecedented recession many voters wanting change. the opec member has been hit hard by calling oil prices. the economycts to shrink 10%. inflation is 124%. >> thank you very much. there are your top stories. barclays, news that they may cut an additional 20% of staff as the new ceo looks to improve profitability. losses are expected to hit hard in asia and the global cash equities business according to bloomberg.
stuarturn to richardson still with us. sandy, let's start with you. as whetherpeculation he was brought in to be more aggressive. he knew what was underneath the lid. looking at this speculation that there might be 20% further cuts in the investment bank, it very much fits with what we think that's why we think he was hired, to boost returns on capital overall for barclays. actually, the investment bank is where those returns can be boosted the most. >> the pace of execution.
he wanted it more aggressive. this is the man to do it. this is the news associated with it. guy: is this it? do we understand the broad parameters of it? is that all we will see? >> what he is doing is getting his feet on the ground. he knows investment banking. he knows how to handle the weaponry on the various tests -- desks. he's going to each line of business and saying, what kind of return on capital are we generating what is your cost-income ratio? where are the weakest bits of the business? what he's that's finding out on a desk a desk basis. jonathan: as you look at the u.k. banks, you have to like
standard chartered. the destiny is out of their hands. emerging markets, commodity story, destiny seems to be in their hands. is that how you would look at things domestically in the u.k.? >> even after the crisis, the banks are still trying to right size. the capital markets are changing. we seen a banner year and fixed incomes and bond issuance. barclays is at bit of both, a unique situation where the trying to get new people on the ground to increase return on capital and so on, but for part of a wider malaise the investment banking industry, where profitability is difficult to increase. i think margins are difficult. at the end of the day, there was competition from new entrants.
the whole banking industry, you have regulators -- there is no win here. is saying they could become tougher on the regulatory front. >> the quarterly really talked about the leverage ratio and trying to calibrate it so that it bit. one of the problems as they came up with the simpler way of running banks or managing them, but it actually hasn't been into bitt into that capital. en the bif report is actually trying to get a more finely grained calibration on that. >> we still need to figure out how that works. thank you for joining us.
first-time voters have headed to the polls since the terror attacks. carolyn joins us from the french capital. talk us through this victory for the national front. the recent jump in popularity of francois hollande has not translated into the ballot box. the national front did three times better than 2010. they are leading in six out of 12 regions in france. the socialist party is only meeting into regions. the republicans are leading in the regions, including paris region with 12 billion inhabitants. winning the first round of these elections doesn't missing mean the national front will control these regions. they have to win the second round. it all depends on alliances in the second round of the
selection next sunday. the socialist party confirmed this morning that the candidates of the socialist party, which came third and three the regions, will withdraw their candidacy in the second round to create a republican barricade to block the national front. region,now, the biggest where marine le pen led with more than 40% of the vote in the alsoeast of france, leading with more than 40% of the vote. these two regions of the most at risk. they have been hit hard by unemployment and the micro crisis. those are two subjects where marine le pen was able to win a large majority in the first round. jonathan: thank you very much.
political risk with the key scenario for 2015. denmark, we don't want more euro. france saying we don't want bigger europe. europe needs to get its act together. draghi can't do everything. he needs the help of the politicians, but the politicians are all over the place. jonathan: a final thought from you. the political risk story. it happening greece. -- it happening greece. does it have more of a bite for you? dollar-yen these are big countries saying no to europe. unfortunately your project needs physical cohesion, and were not seeing it. we could begin to see fractures developed quickly and that could impact whenever they occur in the markets. jonathan: big thanks for joining
>> 30 minutes into the trading day. let's talk about the markets. bounce,etting a draghi oil stocks suffering. i urge you to take a look at the last five days. we are veryr, but much down over the last five days. the crowded trade suffering a little bit. jonathan: this rally is not convincing. we'll go through the other asset classes. euro, weaker. there is the kicker.
wti south of $40 a barrel. the opec hangover. you'll notice some of the oil majors, service producers as well, coming under more pressure. we have your stock movers and top stories. >> all majors being lower, one stock and focus on the lower side. , it's not getting its hands on general electric's appliances unit. that comes off the table because of regulatory concerns. this is the biggest fall for electrolux since 2011. worthk. listed company, 1.2 5 billion pounds, outsourcing services. down some 6%. trading will not be pretty. neither is profitability. they were both decline due to a week pipeline over the last two
years. on the upside, stocks are up in general. home retail is leading the charge. up some 3.4%. once again, big speculation swirling around home retail group. up.french rival is jonathan: thank you very much. the oil story in the stock market open, $39 crude, the headline in the commodity market. opec effectively gave up all pretense of acting as a cartel. vienna. everyone i spoke to tells me it was chaos, hectic, a mess. tell me why this meeting was that much more different than any other opec meeting? chaoticnk we had a very
conclusion after a contentious couple of days. when the ministers come out of opec headquarters after they made their decision, normally they are swarmed by reporters who want to get their opinion on the decision. this time, they were swarmed by reporters because they wanted the decision. we did not know what the decision was or understand what the decision was. suggested they decided to raise the ceiling. some ministers said they left ascending where it was. the opec secretary-general said they kicked the can down the road and will decide at the next meeting. , thely, in the communiqué was no mention whatsoever of the production ceiling. i think that really characterizes this meeting. we did not get opec speeding and one -- speaking in one voice. it was very messy. about an hour before they came out, writers got word that the
ministers had agreed to raise the production ceiling by 1.5 million barrels a day, in line with what they were already doing. when they came out, it wasn't that claim. the oil decline we have seen of the first headline didn't change. the oil price stayed where it was. that means the market has interpreted this as they will do what they were already doing. there is a risk they will produce more oil. guy: let's go back to vienna and recap. let's take a listen to the opec secretary-general. now for the remainder of this year and next year, i think by that time anybody will see how much they can really contribute to the effort. one of the reasons we did not really mention the amount is because we are looking to negotiate with non-opec more and
see how we can reach a collective effort that all of us could conjure be to the market. jonathan: every country for itself? >> it does look like it. it was a unique meeting. it almost looks like that opec has decided to market without using numbers. they had been producing around $31.3 million -- barrels a day. this doesn't change anything in the markets. it gives them a bit more bandwidth and accommodating. before the news conference, there was report that circulated that put that target in line with production as a target, but they didn't do it. why did they step back from that?
they were to have officially made it 31.5 million barrels a day, venezuela and others, they would not find that ,n easy decision to come to because they have been calling for a cut for a long time. the fact that they went to 31.5 million barrels a day suggests that they were not sure or couldn't make a decision. jonathan: when i look at the research that has come out, the death of opec, effectiveness of the cartel, when you look at the brent curve, it has not had a dramatic effect at the backend. it may keep a lid on things in the months to come, but does friday change the game? >> they will continue to produce as they are. that's what they mention. it does throw in interesting
elements. what will happen when i ran comes back into the market next year? the market was hoping for some clarity in terms of how they would deal with it. they didn't even mention that. that adds another element of uncertainty for next year. what does this mean for countries like russia. upsideust be very little that there seeing right now. opec is going for it. this is the saudi strategy 2.0. we are just going to go for it. for russia, saudi arabia has been asking if they would like to join us and coordinate cuts, and russia has not been keen on it. the latest comments have been
that opec has decided to not even stick to the 30 million barrels a day target, so why are we cutting. guy: thinking three moves ahead, which vladimir putin says he often does, where are the three moves ahead? >> for russia, the weaker wrubel has helped oil producers to continue pumping. if anything, russia has been maintaining 10 million barrels a day. can they sustained those levels? very much so possibly a small marginal decline. getting an outright cut combining non-opec and opec is a herculean task. we always discuss state actors, the saudi's, russia, etc. what does it mean for the
private actors and producers that now face an opec that doesn't seem to be interested in trying to get the price of crude a back -- crude back above $70? >> private actors, cost setting mode, will try to see how efficient they can be. the u.s. is a great example. those producers managed to cut a lot of costs and trim down operational side of things. they will continue to try and maximize output. you breach storage capacity, you start to move down towards the marginal cost of production. , does that have more fuel in it after friday? >>* we still think we are far away from those peak storage capacity levels. there are a few hidden dynamics in the market in terms of the storage levels. we are fairly comfortable. in terms ofhing,
how non-opec suppliers are adjusting, it's not the high end of the curve. lack when itigger comes to adjusting, 12-18 months. this is where u.s. shale is important. we are starting to see the earliest signs of the decline. months wefew more will start to see the sharp decline rates of volume come through from the non-opec side, and hopefully the markets start getting balanced with that. jonathan: we have been calling this for a while, u.s. shale is a lot more resilient than people thought. there are some entrepreneurs in the u.s. you can't go to much higher because these guys will be back in the market. nice to see you. next, left in the dust. making year, we
additional 20% of investment bank staff. most of the losses would be in asia. the ceo seeks to shore up profitability. the cuts would come on top of existing program to eliminate 7000 jobs. german industrial production rose less than predicted in october. a slump in energy output. output adjusted for seasonal swings rose 0.2%. has full and the central bank lowered the great. that move came as the dollar rose on expectations of a interest-rate hike following strong jobs data. european companies have found themselves left behind in what was a record year for m&a. european targets accounted for the smallest share. why? >> that's a great question. we've seen booming m&a this
year. it has been ridiculous. there is so much activity going on. seen a muche've slower pace. part of it has to do with people being skeptical about the economic recovery in europe. there is more confidence in the u.s. accelerating growth rather than europe. people are taking a fresh look at the u.s., and now we wonder whether that activity will take place in europe as the economic recovery stabilizes. allergan: the e deal? >> it could be answered in both ways. answer -- bothl businesses are truly u.s. businesses.
some people could argue that it is a european deal. for data reasons, it is a u.s. deal. it accounts in one of the companies, one of the sectors, pharmaceuticals, still one of the busiest this year. and of takeovers pharmaceuticals have taken place in the u.s.. in europe, we seen a lot of small midsize deals. surprise is in the m&a numbers. it's the participation of mining how small it was. that bp deal and wondering where the rest of it went. guy: what was the prime driver of the m&a we have seen this year? that ink about the fact
eps is being pumped by share buyback. it's driving financial rather than industrial logic. how much is financial, and how much is industrial? >> a combination of both, right? we saw a few deals last year were more or less financial. to apply a financial logic to a deal. it's also true what you suggested about oil and gas. , and lot ofhe year people were predicting at the end of last year that this would be the year. it has been very quiet. part of it has to do with oil prices being unstable. guy: what i'm hearing is that the sellers are pricing it at $50 a barrel, and the buyers are pricing it at $20 a barrel. >> exactly. it is spread across the board.
it has also been in pharmaceuticals. we've seen a huge boom and bubble and biotech stocks. overpaying amid these bubbles? it's not just oil. people are getting more worried about paying too much. jonathan: the full write up of that story, the wrath of 2015 and deals across the world on bloomberg.com. up next, a busy day ahead for the markets. we will hear from the bank of england and the fact, everything you need to know for the rest of the trading day. ftse the up 36. dax up 150. good morning. ♪
>> we consider the package and that will was proposed by the committees as exactly the right one. marketslearly that the have demonstrated, it was not a package meant to address market expectations. there was a package that was the reaching of our objectives inflation. if we have to intensify the use of instruments to assure we reached the price-still demand that, we would. there cannot be any limit to how far we are willing to deploy our instruments within our mandate and to achieve our mandate.
mariota druggies speaking friday in new york. draghi -- mariota rock speaking in new york. >> this is the chart i want to show you. see, european still down on a five-day basis. not a pretty picture. it is less crowded this monday morning. jonathan: looking tiny, tiny, tiny. here is your day ahead. carney will be speaking to eu parliamentary committees and brussels. later, jim bullard will speak about the u.s. economy and monetary policy. plenty of ecb speakers ahead.
we have been talking for the last 90 minutes about whether you need to revisit the 2016 trade.uro are you rethinking it after thursday's events? >> the short euro, it depends on where you got in. people were in at short levels that were sub optimal. i think that for the time being, mario draghi is probably happy with the middle of the range now. from the ecb standpoint, they are happy. they could do more if they need to do more, but i think they're comfortable where the currency is. guy: long european equities, a crowded trade, a little less crowded now, did thursday change anything going into next year about how that trade works? >> the key point is that even though it is less crowded now,
it's probably still quite crowded. i think that is what will drive that trade in the next few weeks and early next year. then we have to see what happens , how the fed move is digested, what that will mean. i don't think we get european equities decoupling too much. the next big event risk is the fed jonathan:. jonathan:with all the arguments from the ecb, the idea that ecb of opening the door wider for the federal reserve to get a move on, higher rates, keep it gradual, do whatever. the idea that the ecb consciously took notes on a fed meeting coming up in a couple of weeks? >> i don't think that was the first consideration. in the back of their minds, they would have thought that the euro is at 105 and change. they did not want it to fall to parity. they think the fed will do some of the work for them.
theye back of their mind said that we can do what we need to do in the short-term. the fed will probably help us. in the long-term, if things get dicey are coming ecb connect again. that was the de facto target range of the ecb right now, 105-110. guy: exactly what mario draghi said in new york. were doing exactly what we need to do. , peoplergence trade have had it looking like this. how far apart are the ecb and fed? >> i don't think diversions will accelerate. it will not accelerate wider. it could drift. it will take a nile -- while for
the markets to digest. what will be the big trends for 2016. we've had some names calling for paired -- parity retracting those calls. it will be tricky with a lot of moving parts. i don't think we will see it. jonathan: looking at rates and the probability of a move in december, we are not around the 95% range we thought we might get to. >> the fed is determined to do it. i think they will do it. i don't think there is any sort of market impediments in terms of pricing jonathan: the stock. great to have you on the program. jonathan: guy johnson is not going anywhere. he stays with us for the "pulse." guy: were talking about the opec hangover. we will talk about what mario draghi did and didn't say. we also need to talk about the