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tv   Countdown  Bloomberg  December 8, 2015 1:00am-3:01am EST

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anna: china slowdown. as therecks slump continues to be a fall in the world's second-largest economy. manus: bhp billiton shares think to -- sink to a 10 year low. the commodity crunch continues. recession asvoids third-quarter gdp gets revised upward. abenomics gets a shot in the arm. manus: and warm welcome to countdown. anna: it has just gone 6:00 in the morning here in london. focused oriron ore
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commodities because we are sub $40. it could spell pain to some of the big mining companies. >> what is your breakeven point. they say the breakeven point is $40, for others it is $44. bhp at $29. that is why they are able to continue. the question here is sam walsh once said at the start of the year that it was fantasyland if it ever made it to $30. anna: let's bring another boy -- voice into the conversation. great to see you. another sign of pain for the mining sector. >> it has been ongoing for a number of years. you have a dynamic in a large part of the commodity sector.
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big, you have the two players who are still quite comfortable. they are not happy, but they are aware that their competitors cannot live down here and potentially at some point they will enable be able to pick them off and a live to fight another day. manus: let's get up to speed now with your first word news. in importsa's slump extended to a record 13 months in november and exports fell for a fifth straight month. the import slowdown means that the industrial plants need less iron ore and coal and consumer demand has not picked up fast enough to compensate. brent crude picked up after plunging more than 5% yesterday. it comes amid speculation that the global glut will continue.
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abenomics has received a shot in the arm after the revised gdp data -- shrinkingther than 0.8% as the primary figurehead suggested. donald trump calls for a total and complete shutdown of muslims entering the notice states. the sweeping -- the united states. the sweeping statements have drawn harsh rebukes from republicans and democrats alike. mr. trump: a total and complete shutdown of muslims entering the united states until our country's representatives can figure out what the hell is going on. nejra: that is your bloomberg first word. for more of these stories and others had to the bloomberg terminal. anna: let's head over to the ink it's in asia -- markets
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asia. reporter: it has been a challenging session to put it mildly. it is just a sea of red. shanghai's losses, as well as hong kong. we are seeing this commodity story play out. particularly for these commodities heavy weighted in these areas like the asx 200 and then the naked to 25 and others othersnikkei and climbing. inthe end, they are joining on the energy-related misery. i want to take a look at some of the losers. the iron ore price slipping to a decade low. is the seconds
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largest oil producer in australia has called off a $2 billion takeover. we are seeing this commodities rout weighing in on a real dealmaking. that would've been the largest energy takeover this year, and it is off the table. we have seen some moves in the for ex space. the malaysian ringgit, we know it is humbling today after a five-date reprieve. malaysia -- five-day reprieve. malaysia also suffering. we are seeing the chinese currency heading for its lowest quote in four years. anna: heidi joining us there from hong kong. manus: let's get more up-to-date in terms of china. fifth month for a in china. you can balance it out looking at the import site as well.
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that slumped for a record 13th month. shipments from the world's largest -- second largest economy dropping. anna: inflation data tomorrow could show that consumer prices .rew let's speak to malcom scott who is our china economy team leader. what does this continuing trade what -- mean. what are the dynamics involved? >> it looks overall like trade will decline in china. that's for the first time since 2009 since the recession. it means this drive to push economy, demand-related is only going to rise. it cannot export out of trouble
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anymore. it needs domestic demand to pick up so that the economy can pick up. like the global demand situation will be near strong enough this year this year, or even next year with a muted outlook. may not bef recovery enough to help revise growth in china. let's talk about the import side of the equation. does this give hope for any sign of a domestic reboot? too big to depend on the rest of the world. it is not about domestic reorientation. >> there are some signs of stabilization. month, down for a 13th but down a lot less than october. some of the domestic driver seemed to be stabilizing.
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passenger car sales in november were up a lot. front, a lot of these imports look better than they do on other fronts. shipments of iron ore on the volume site do not look too bad because the value has come down so much this year that it looks a little more dramatic than the volume would suggest. manus: our team leader in hong kong on all the data. anna: let's get back to our global strategist for jpmorgan. the trouble with looking at this story is it is telling you about old china and new china at the same time. there might be less of that run materials, but what is the consumer doing? these are valued numbers. so the price they are imports
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fall -- this is one of the things but keeping chinese troubles in perspective. it has stimulus from the global economy. it is a massive commodity importer. it is having a very large trade balance because the value has fallen significantly. the direction of travel for policy for more than half a decade. they will be surprised how fast they have pushed that forward and how little concern they have for holding up the old types of industries. about taxned a report cuts. of fiscal space . you could stimulate the economy through spending but this is
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usually the kind of stuff you want to get away from. just cut taxes to consumers. manus: the other letter is the ascendancy which is the yuan. we saw the fx reserves drop again. record declines. close since 2011. >> they have several levers they can pull. all have severe downsides as well. we saw the severe reaction of the world when it moved only a couple percent. they are very well aware that they are playing with fire, but domestically capital outflows would come from a severe devaluation. we have heard from a lot of people that now they can devalue it as much as they want -- i think that is underestimating in importance they play
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regional stability. anna: and chinese have said they do not want to drive a short earned currency demand. guest: i think it can happen gradually over time. the other policies they have, plenty of rim to cut the rrr rate. that is pro-declaration, we know that the corporate space in china has been too rapid. manus: are you worried about default in 2016? >> i think there has got to be a default cycle coming. or default ast the government bails out the banks as they have done? i think ultimately, defaults will be fairly contained within china and they will default to fiscal policy as a way to support this transformation and overall growth without dropping the currency or encouraging even
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more debt in the private sector. talk of a nymex. -- ava nymex. -- let's talk abenomics. upwardivision -- revision. this will be good news for the japanese and for a bit -- and for abe. inorter: the number came quite strong, a 1% growth in the third quarter. contraction..8% last week, economists revised their numbers upward, given the strong capital expenditures numbers. fronts.n several business spending, consumer spending, and inventories.
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it was good news for the abe administration because the economy did not go into recession. tell usat does this about the broader economy? the boj has held firm on their quantitative easing policy. if we might get more fiscal practice as soon as the end of the month. administration is still expected to move forward on their fiscal package. there are pushing toward companies with strong profits. we have not seen wage growth or a lot of investment here. stillexpected that a will -- that abe will still push for that. a lot of economists don't expect
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that in the december meeting and they are split on whether we will see it in coming months. governor corona said he wouldn't kuroda has said he does not expect to see that in the third quarter. manus: we have the investor data for anglo american. that kicks off at 9:00 a.m. u.k. time the will get industrial production and then a little bit later the eurozone gdp. ♪
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anna: welcome back to "countdown." here is nejra. nejra: orange is said to be in talks to buy telecom's media assets. they said they could keep a minority stake in the company and no formal offer has been made. we rejected a billion-dollar offer in june. there are expectations that gun enthusiasts will buy more rifles as calls for restrictions increase. pimco is going for heavyweight names in an effort to reassure its clients. ben bernanke, former british prime minister brown, and others will be part of a new global
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advisory board. they receive about $1.5 trillion and is seeking to fortify ranks after the departure of bill gross and others last year. theng the place will be shopping mall -- they will be relegated to the cac net 20 index. lebron james signed an unprecedented contract with nike. they estimate the value at between $400 million and $500 million. nike said in a statement that the basketball star provide significant value to our business and shareholders. for more on these stories and others text or look at us at anna: expected to announce strategies to combat the commodities rout.
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stocks dropped 70% this year. wherego to johannesburg many of that businesses are based. what announcements might we get from anglo today? reporter: good morning. that theyperations -- we are expecting that there may be a dividend cut. something they expected to find. it is getting harder and harder in the environment of falling commodity prices. investors are showing concerns about whether the company can weather the storm. we see that in the 62% slump in the shares this year alone. manus: how much trouble is the
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company realistically in? this has been under pressure for quite some time. reporter: commodity prices have fallen quite significantly. we see the reached near six-year lows. the company has been announcing job cuts, as well as labor protests at some of the profitable mines. iron ore is also one of the worst performing metals this year alone. affectingfinitely their finances. we are seeing that some of the investments outside of africa, the company invested $16 billion in an iron ore mining company. that is not faring well at the moment. he came in when iron ore prices were at their worst. the company is definitely facing
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challenges and it seems quite likely there will be a dividend cut today. >> stumbleupon dollars. -- tell us where the sector's it's because of its dividends. the oil companies have said they are so important and we will not cut them. we've seen glencore have to cut there's. >> there is a return to higher prices if they really pledge to guarantee dividends at a significant level. it makes me nervous. when you have companies that are not appreciating the new world they are in. if i were a shareholder, and i -- they're actually
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raising cash to potentially pick up weaker competitors. they could potentially pick off a -- m&a at the bottom of these prices. manus: what about the comments -- the title of the bloomberg story is the word bankruptcy might be the mining industries last best chance to clean up. i don't think he is referring to any of the major brand names. i think what he is referring to is here -- is that something for 2016? >> wherever they are morning, there are parts of that universe where most of the producers have a huge amount of debt which is causing them to continue to mine at very high volumes. bankrupt or go
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default on southern portions -- it's a question for each individual company, but it will be a shakeout. manus: these are the commodities which are unprofitable. nickel, aluminum am a zinc. -- aluminum, zinc. >> you could get a large producer that shows the responsible approach and cuts production, then they can raise supply -- we are seeing the opposite of that with oil and opec. or the small producer goes to the wall and has to shut down operations. saye companies -- i would we are allowing that to happen and taking assets off the receiver for another day. anna: that kind of chart has to be based on some shoes of what is profitable. cutting measures
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are -- >> it is so hard to get your hands around this issue. industry is very hard to cut -- even an individual company. my father said you can always find 10% in the cost base of a company. we have seen this in the show where they are telling us that their breakeven was north of 60 and then under 40. .ou always find under pressure under this kind of pressure they are finding ways to raise productivity and survive another day. anna: i would love to be there for your pocket money conversations. find another 10%. manus: i always have 10% tucked away somewhere. you mentioned the shale
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reducers, what we have is a graphic on the cash piles of the balance sheets. and exxon -- even though they are at a 10 year low there is a mountain of cash in the oil industry. do you still believe in oil, and what is the prospect for m&a? exxon still leads the pile. what do you make of that? be aere should absolutely significant amount of m&a going forward and half a decade, dealing with the consequences of this crash in prices. i don't think they are going away at any time for the next couple of years. you need to bang things to happen before opec will consider coming back. scream going to come on -- downstream. and then they need to take a battering, believing they have
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what they wanted and then come raise the price. next, the chancellor's inner past. what do we mean? ♪ the only way to get better is to challenge yourself,
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and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.
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it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. manus: it is 6:30 and london and seven: 30 in -- 7:30 in brussels. nejra: china's exports fell for a seventh -- fifth straight month and imports fell to a 13 month low. china's industrial class needs less iron ore and coal while consumer demand has not picked up fast enough. brent crude has rebounded slightly after lunging 5% yesterday to a six-year low. it comes after expectations that the global glut will continue. shot ins has received a
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the arm after a revised gdp data shows that they avoided a recession. they actually grew rather than shrinking 0.8%. donald trump has called for a total and complete shutdown of muslims entering the united states. the sweeping statement has drawn harsh rebuke from democrats and republicans alike. mr. trump: donald trump is calling for a total and complete shutdown of muslims entering the united states until our countries representatives can figure out what the hell is going on. that is your bloomberg first word. for more on these stories, text the bloomberg terminal or anna: the november passage numbers coming through from this airline. impact on the attacks
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the month of friend 13th of last month, the impact was not big enough to hurt 2015 targets. the cfo quantifying that saying the impact on november revenue was about 50 million euros. we'll see how long the tale is on this essentially and whether people are influenced in their travel plans by this over a long-term period. in terms of the overall richer they say the seat occupancy rate was up between november 1 and the 13th starting with the period before the attacks. >> let's turn our attention now to the chancellor. here's george osborne with them entry -- message for america. >> might message for you is that britain has its mojo back and we are going to be with you as we reassert, confident that our best days lie ahead.
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>> those words came as he spoke in new york last night. he also said it was a real source of pride for him that the house of commons voted overwhelmingly to join coalition airstrikes against islamic state targets in syria. >> he also spoke about the crucial issue of bruton -- britain's relationship with the eu. >> britain is not part of some of these central eu projects like the single currency and the euro nor indeed the common border. and the european union has devised for a large member state , the second-biggest contributor to the eu budget sitting outside the central arrangements, yet that is -- we need to make these arrangements work better for britain and those trying to make their currency in the euro stronger.
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candidate has stressed the importance of britain to staying in the eu. the make the point that union has brought economic benefits to london and our country, also cultural and social benefits. so i am passionately in favor of a sting a member of the european union. david is still here, a global market strategist at j.p. morgan asset management. listening to him saying the u.k. has its mojo back, being specific it has outpaced the g7 and is projected to match the u.s. in 2016. that is quite a bullish call, given the budget you have just seen and the state of the global concerns, is that a fairly bullish call from him? >> i think it is reasonable.
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we still believe the u.k. will grow in excess of 2% next year. it may not be the most rapid pace but there is a resilience to their expansion. there is plenty of room to go in terms of people to come into employment. investment can still be made. the u.k. is undergoing a labor supply shock and this has actually been a recovery -- has not been that fueled by credit. now that starts to change. you see non-secured debt, well above income growth. you can see house prices moving up significantly. i think we are transitioning to ofoint where the bank england can consider doing a rate rise. if we get one or two fed rate hikes we think the bank of
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england will consider getting on its way. anna: what about the subject of brexit? is this something that only gets the markets attention running up to the event or is it a slow burn? >> i think it is something that we will only see global investors focus on a month or two before the event. global investors will push sterling down and reduce the listed in theies u.k. who derive a huge amount of revenue from europe. you don't know what tariffs , or the placed on that restriction of goods and services, because you do not note the scale of the relationship. would it be a separate treaty? with that uncertainty you have to pay a lower multiple. manus: you have worked and a whole variety of industries and roles.
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in 2016 inone issue terms of the unknown knowns, the tariffs, the cost of free trade, they haven't really touched on it. every time you see osborne and listen to the political glitterati, they do not touch on the actual costs. anna: it is a policy vacuum. you don't know what would replace it right now. thef, for example you join european economic area, you have laws intote 80% of eu your constitution without any say. you get a fax from brussels saying, do this. it is amazing to me that people think when you leave you get control. anna: you can control of relationships outside europe. i still believe our future is better off inside the european union, but the big issue why we
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are not focusing now is we don't even know it is next year. look at the progress or lack of it. terrorism, immigration, sucking the life out of this process. if i had to guess now i think the referendum would be done for 2017. manus: orange is said to be in talks to buy telecom. ejra as new details. nejra: we are hearing that orange is in early discussions about buying the media assets. of ae say this is one number of possibilities that orange is considering. in a potential deal, what could happen is boygues would carve out the construction unit and maintain eye minority stake -- maintain a minority stake.
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it would come from orange, the biggest fixed line carrier, with the conglomerate, bouygues. it reflects a wave of consolidation that has swept the european telecoms company. orange has been struggling to sustain domestic sales and earnings growth from competition -- because of condition from carriers. and where that telecom unit was a cash cow before, what happened market,iad entering the that triggered a price war. ygues has already been the target of a takeoff -- takeover offer in june. it rejected the offer for its phone unit. economytime, france's minister criticized the plan and advised the telecom moguls to invest in infrastructure rather
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than an dolch in deal making. dolch in --an an in dealhan indulcge making. they are arguing it is not good for consumers. manus: david is still with us. let's talk about this m&a. being left behind in a record year of deals which talks about global acquisitions. europe has been left behind in terms of being the target. >> i think this goes to the pessimism within europe and around the world, about the scale of future nominal amend growth. you have -- demand growth. you have populations that are stagnating if not tricking. debt levels that are pretty high and the difficulties they have
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had in restarting the economy's as well. you can understand why targets in the u.s. have been more attractive based on up your demand forecast. anna: do you think in 2014 we draghi-gate, post and the disappointment around the level of quantitative easing, do you think 2016 marks a turning point when we look more to government to change things and fiscally stimulate next year? do we have a continuation of what central banks can do for us? >> a think it will continue. we see the u.s. and the u.k. trying to exit and they are going even further. draghi will do more in the first half of next year. on the fiscal side, things are changing. will see is your policy than we have seen in the past for different reasons. lackinge, what has been
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throughout the post crisis era is really aggressive structural on the parts of the economy that need it, to stimulate productivity growth. every speech that janet yellen draghi give say these are the main issues, can you please address these issues? central banks have had to bear the burden more than they should. wish i could tell you that was going to change next year but unfortunately i don't think it will. manus: if you take that as being that nobody is listening, politicians are choosing to listen less. if you look at japan, the third part of abenomics is structural reform and to that extent everything i've read says the bank of japan is on hold at the moment. but they are going to look at a fiscal stimulus package.
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are they any better at structural reform? that was the third arrow of other nymex -- a been a mix -- abenomics. changes toe huge corporate governance and shareholder rights which are arguably the most important thing for investors. what we are lacking is addressing the bigger challenges in japan. where is the opening up of immigration flows and the provision of greater policies to raise the birth rate. a good amount of reform from japanese politicians. that's what happens when you have a mandate and to decades of stagnation. anna: it would take to decades to jackie -- generate some of the long-term -- that they require. >> and of course japan is worried about china. manus: china is slowing down and commodities are under crunch,
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oil doesn't know where the bottom is. europe has relatively anemic growth. how do you look at the world? where do you point capital with the most impact? >> we still like developed markets over emerging. we still think there is certainly mileage and eurozone and japanese growth. we do think the equity market will be led higher by a return to earnings growth there. the big question for next year is the high-yield credit market. we are clear there have to be some opportunities. there are plenty of companies who may be slightly punished but the scale of the coming default cycle, how much contagion do we see from energy and mining into those other sectors through the channel of the losses that those sectors inflict -- manus: any scale of numbers? anna: is it systemic?
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>> i don't think it is systemic and the way that subprime was, for many reasons. but i think the credit cycle in the u.s. has turned. the scale of the damage to investors is up for huge debate. we have raising our exposure to high-yield. but you have to be selective. anna: thank you. stay with us. manus: mining misery. the worst performing sector in the stock 600 for 2016. is there more or have we hit bottom? ♪
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anna: welcome back, this is "countdown. " nejra: air france says passenger traffic was affected by the
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harris terror attacks. -- paris terror attacks. the company said the impact will not be big enough to hurt the 2015 targets. orange is said to be in talks to mediaek telecom and projects. they protected -- rejected and $11 million takeover offer in june. firearms and rifle shares are up in the u.s. today. the company shares have advanced in recent years in the wake of mass shootings like the one in california last week. heavyweightng for names in an effort to reassure its clients. andbernanke, gordon brown, will be partrichet
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of a new global advisory board. they are seeking to fortify their ranks after the departure of bill gross and others last lebron james and signed an unprecedented lifetime contract with nike. estimated the value of between 400,000 -- 400 million dollars and $500 million. they say you provide significant value to our business, brand and shareholders. for more on these stories and others had to the bloomberg terminal. have to ask the question, do you think i will get a contract like that with bloomberg? maybe. if you were the cap for a lifetime. manus: but you commodities. four out of five and the biggest
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losers this year are commodity producers. amongst them are anglo american who kickoff their investor date later is morning. anna: we are joined now by the global head of commodities research. is the mining industry burying its head in the sand and hoping something changes. they have surprising themselves by how low these commodity prices have come. these promises to shareholder and they are under increased pressure to keep capex. back we're expecting it to goat to low -- to go to low digit growth to next year. but it becomes even harder for them both months out. manus: the barriers to supply
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november the 27th which is almost beggar thy neighbor. i will not stop because if i stop i will give her the opportunity. will it continue? >> i think it will but there is increasing pressure. the producers themselves do not want to cut supply. they like picking things off the ground. the two point gain is a thing. if they cut it helps the neighbors and may stabilize the market that they take the hit for the industry. there are also things like social economic issues are looking for anyone else to help them out. in china they are asking the government to come support us. they are doing everything they can to try and stay in business. financial markets start setting in. we have already seen a pretty negative loop from credit markets, that will determine who wins and loses and refinancing
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will get harder. anna: it is basically getting more expensive for these mining copies to refinance. when they go to take more money and loans it gets much more expensive. we see the high-yield market diverging. >> we still have cheap money, but they say the return on commodity assets question mark you guys are the worst of the worst and it is hard to see how that changes in 2016. we're still in an environment where if you are in the service industry you are doing well, and other industries you will not see much growth. manus: if we talk about that minors with angle american today, there was a moment when for glencore the pricing quoted. there was a very seminal moment in the last quarter. travails,ic
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commodities are slowing down and the producers are not doing much. how much exposure would you realistically take? >> i think this commodity bear market is near the end of the beginning. this has been going on since 2011. 18 months ago people were saying this was just a correction. it is certainly not but we are lacking the mechanism to bring it to an end. over the next 12 to 18 months we are expecting -- we're waiting for them to be carved out. huge matt of a turbulence as it happens and until that happens, i am not raising my exposure. i'm focusing on what has to be the winner out of this. those with cash piles who can mop up all these assets. >> there are two things that will help break that cycle.
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the divestment. everyone will be trying to sell assets here and if that is not successful you start to see them disappear. oilrices, it is rare to see going up and commodities going down. moneys tend to trade together. --we start to see recovery, if i am a low cost producer i'm desperate. this wave ofee divestment next year, who is buying? >> historically -- manus: [inaudible] [laughter] historically go to chinese investment and we are seeing some chinese overseas investment, but many of them are in exactly the same problem. focusing on japanese trading houses they have been focused for a while with private equity. new private equity money is harder to come by.
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manus: i have written down shock and donna. it's referring to cynthia carol and she ditched the dividends. my question to you is this. the brave survive every crisis. would it be a foolhardy deal that says we are off the table and done with these dividends we will focus on this company and getting us up off the ground. is that what you want to see or is that really a short serving ceo. >> i would say a couple of things. in the previous segment i said that's what would like to see. batten down the hatches, look after the balance sheet and mass capital to pick off the weaker ones in the next two years and take a tenure view. before he handed it over to that, the largest part of the actively managed equity assets out there are income related. anna:, thank you, sorry no time.
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take you for joining us. thank you for staying along with us. manus:, next up, japan dodges recession, china is a slowdown in the commodity -- all discussed next. you used to sleep like a champ.
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slowdown, asian stocks drop and exports and imports continue to fall in the world's second-largest economy. shares shrinkiton to a 10 year low and iron ore drops below $40 per metric ton. bullet.odging a japan of voids recession. third quarter gdp is revised upwards and ava nymex gets a stte -- abenomics get the shot in the arm. good morning, you're watching countdown. anna: welcome to the program.
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it has just gone 7:00 here in london. let's look at the futures in the european equity trading day. ore at $40.ave iron a real rife in terms of commodity trying to find the baseline. for angloing american, what is going to happen with dividends? and of course the chinese import export data. that did nothing. anna: interesting to see what anglo america has to say. we see some of the mining companies clinging to there's another saying they have reduce them overall. in contrast to the oil sector where they have clung to them. let's get the bloomberg first word news with nejra cehic. imports slump
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extended to a record 13 months and exports fell for a fifth straight month. the import slowdown means that china's industrial class need a less iron ore and coal while consumer demand has not picked up fast enough to compensate. brent crude has rebounded slightly after plunging yesterday to a six-year low. it comes amid speculation that the global glut will continue after expanding its strategy to limit output control prices. abenomics has received a shot and the arm. the economy actually grew 1.3% rather than shrinking 0.8% as a preliminary figure suggested. donald trump has called for a total and complete shutdown of muslims entering the united states. the sweeping statement has run harsh rebukes from democrats and republicans alike. mr. trump: donald trump is going
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for a total and complete shutdown of muslims entering the united states until our country's representatives can figure out what the hell is going on. nejra: for more on these stories and others, head to the bloomberg terminal and manus: let's check in on the asian markets. heidi is standing by. the reaction is the dominant theme. >> it could not have come on a worse day. we're already dealing with his commodities route and in europe having a terrible hangover. asia we had the shanghai just closing a minute or so ago and it is up by 9/10 of 1% at the close. no such luck in the last minute wrapup today. would also did not get that
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reverse sentiment of bad news means more easing. margin debty, coming down for the fourth straight session telling us that chinese investors are not exactly known for being a verse to risk. elsewhere it is just a picture of what that oil route has done a sentiment. even the nikkei we had that really robust revised gdp number. japan avoiding recession in the quarter not enough to get tokyo stocks up into the green. i just went to show you what the picture looks like in terms of the sector breakdown. inre is not a single sector the asia-pacific in the green but in particular look at oil and gas they are down 3% for that segment. i also want to quickly take a look at what we are seeing in currencies because this is also a commodities story. the malaysian ringgit taking a real leg down.
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this is asia's worst-performing currency. of a bounce a bit in that currency but it is on that downward trend. that commodity story continues to play out in the worst possible way. anna: a challenging trading session in asia. a tidy in hong kong -- that is heidi in hong kong. well imports slumped for a record 13 months. manus: imports dropped six join it percent -- 6.8%. about half as quickly as the central bank target. anna: let's go there to our chief agent economic correspondent -- asian economic correspondent. what is it mean? >> -- what does it mean? >> it is a different -- disappointing set of numbers
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capping off a disappointing year. u.s. hasrecently, the been holding up as a key market for chinese exports but even that fell back all stop big export markets all now buying the chinese goods will stop difference for economists is that it is hard to see where the circuit breaker will be. is within china, the factories are suffering from week demand -- weak demand, and eurozone inflation. the u.s. economy is touchy in areas. it is hard to see what will suddenly break the circuit to get the export engine roaring again which is why economists are waiting to see if all the stimulus will start to green -- gain traction next year. manus: the import slowdown seems to have moderated.
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is that a fair word? what does that tell me about the domestic side? rebalancing away from hard, domestic, choking the air industry to domestic consumerism. number anticipated could point to a pickup in demand. there is also a pricing impact on the import side. the weaker commodity crisis is skewing that data set. it is not quite clear whether it is an improving consumer story or a dominant fall in prices story, but we do know that on the whole, consumption is that thep in china and services base is getting off the ground. that is really important for the rebalancing and the new growth drivers that china is striving
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to get going and meet their growth targets. in the coming weeks we have a very important economic policy meeting set as the growth target for next year. it will be very critical to see what kind of target they do set and whether or not consumption services will be enough to hit that target. better news in japan. omics has been given a boost by revised gdp data that shows the country of what it recession. let's get mota jodi schneider -- let's get more with jodi schneider. what was better than we previously thought? reporter: the number was 1% growth. 0.8% contraction number. it was inventories and business spending capitals and expenditure and private spending
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as well. a lot of data points showed strength. the capital expenditure number was so strong last week that economists had advice -- revised upward for growth although they did not expect this much. this was somewhat of a surprise. which of course meant that there was not a recession because you needed the two quarters of growth or contraction for recession. the second quarter was revised upward even though it was still contraction. what can you tell us about the broader economy? economistsasically, are saying this is good news. to not be in a recession, but the strength of the recovery is the real question and how much are is this is going to be investing? prime minister abe has been
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pushing to raise wages and to invest in japan and not overseas. they have very strong profits and good stock market gains which is not coming back into the economy the way the prime minister and the bank of japan would like to see. we don't expect the bank of japan to ease further, but we do expect that the government will go ahead with some extra stimulus. manus: jodi scheider there in tokyo. let's bring in the ceo of viva investors, he oversees the management of 250 billion pounds in asset management. we have just done a quick trip around the world. china under pressure. but oil sub $40, iron ore is on its knees. commodity producers do not know what to do. it does not bode well.
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you managed to do 250 billion pounds. how confident are you about 2016? >> it is difficult to pretend you have any certainty in such a world, but i think that is one of the things you have to do. as best as you can prepare for the unexpected. is ifna, the issue there it were a more normal and less managed economy we would have had a major recession and capital would have come out suddenly from state owned enterprises and you would have seen a big collapse in capital spend and maybe you would have moved on to the new form of consumer oriented economy. essentially, the economy is trying to flick -- fix itself while still flying along. fundamentally, it is a difficult one to analyze. but clearly, you touched earlier
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on the fact that it is moving away from the old model. of the tectonic plates that might give is this data we are looking at today, this chinese currency. the renminbi is still making china not competitive. anna: so you think despite the fact the government has said they want to boost to short-term trading through devaluing the currency, something has got to give and that might be the thing that gives? >> i think it has got to give. they want to manage it like they want to manage everything else so they want to send the right messages to the market to control the decline but longer-term that has to make sense for the chinese economy. grid: in terms of the debate that has steered equities along, it feels as though we're coming to the end of that cycle
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-- someone explained qe to me when it was first announced, i found it hard to understand what it would do -- are we at the end of stimulus cycle? >> i don't think we are. i think there is still plenty scope for stimulus, particularly in japan will stop one of the reasons you would stop providing stimulus is if you're worried about inflation and with what is happening to commodity prices doesn't get much of a worry. i thought it was quite interesting that japanese gdp revision surprised on the upside and the stock market did not get too excited because what people were hoping was another big bazooka coming in the form of qe and stimulative measures. manus: is that what our lives have come to? in myt what my pension
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investment portfolio is dependent on? >> investments are very underpinned by inflation at low levels. this is that challenge the u.s. is facing. can it take the world off that drug? manus: that is the critical part. >> our view is the u.s. has got self sustaining recovery and will be able to sustain -- the amplitude of the next rate cycle will look nothing like the kind of moves we have seen in previous rate cycles. the u.s. does have to move otherwise it will find the economic cycle is over before it has touched interest rates. anna: that is something that will start this month, you think? >> i tend to specialize in two to three year views, which can seem like weasel words, but we do expect it this month. manus: you gave me a lovely new
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word, the amplitude of the rising rates. you are a three-year men. grand. tell me your view versus the market. the doctrine of the federal reserve because the market is way under that. >> i don't disagree with the mark on that. i think the terminal level of rates will be far lower -- manus: 2%? >> perhaps. in that timeframe. i think we will be doing very well to get interest rates up to that level in the next three years. anna: stay with us. manus: let's set up the day investor day for anglo american kicking off at 9:00 a.m. anna: later on this morning, we will get you data from manufacturing and production. and the eurozone third quarter
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gdp. manus: don't miss this conversation of the day at bloomberg. john brown. 9:30 london time. anna: and will the miners cut their dividends? sources tell bloomberg that that could happen. details next. ♪
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anna: welcome back, you're watching countdown all stop that it to the boom -- bloomberg business flash. nejra: air france said passenger traffic was affected by the paris terror attacks. by about 1%cy fell in the wake of the atrocity shaving 50 million euros off revenue. the company said the impact won't be big enough to hurt 2015 targets. orange is set to be in talks to buy bouygues telecom and media assets. sources say bouygues could keep
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a minority stake in the company and no offer has been made. shares in smith & wesson reached an eight year high in new york on expectations that got enthusiasts will buy more pistols and rifles as calls for restrictions increase. going for some heavyweight names in an effort to reassure clients. announce that the former fed chief and bernanke, gordon brown, and jean-claude tre ichet will be part of a new global advisory board. they are seeking to fortify the ranks after the departure of bill gross and mohammed last year. and lebron james has signed an unprecedented contract with nike. the agent who represent -- were presented michael jordan
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estimates the value between $400 million and $500 million. nike said that the 30-year-old esquivel star provide significant value to our business, brand and shareholder. for more on these stories and others head to the bloomberg terminal and manus: thank you very much. anglo american is holding an investor day today and glencore is set to update shareholders later. they are the worst performers this year. now -- 're joined i'm pleased to tell you that monroe is still on with us. good to see you. let's start with anglo. what are the key things to look out for? >> it is all about the dividend today. probably the worst kept secret that anglo is set to cut the dividend. we expect an announcement about 8:00 ahead of the investor day and coming against a backdrop of
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the worst environment for mining company since 2009. more importantly, this announcement will be watched very closely by people in the industry as a guide to what bhp and glencore do with their policies. manus: this is what you are saying, nirvana. the continue of the bhp, rio and bali continuing to that never-ending rising dividend. it is fairly untenable? >> it is and i think investors have come round to that idea over the past months. the payoff ratio is seen as much more sustainable as a way to pay dividend in a cyclical industry like mining. anna: this ties into something you have talked about and written about recently which is investors having a long-term approach and building up relationships with his this is so they understand them. surprised will not be
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if the cutback on dividends? >> in a cyclical industry it doesn't make sense to pretend that your earnings or dividends can progressively increase as far as the eye can see. as investors we understand that certain industries are more cyclical than others. it has been obvious for some time that times are tough for minors. i don't think this is a huge express. manus: i get the impression in ivanwhole conversation -- had his moment in the third quarter where he blinked and he took massive production out of coal and i think zinc and he also tackled the dividend. maybe i'm a skeptic, but it hasn't redeemed tim -- redeemed him. >> the main issue is that there are still huge amounts of oversupply of across the
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commodity markets until we see other company start cutting back production and other high cost reducers being squeezed out and going bankrupt. you have massive tailwind improving cost base for the lowest cost inducers. -- producers. they are still very profitable. until we see them exit the market and go bankrupt, there is no end insight. ewan, let's come back to you. to drive more attention among people like yourselves toward long-term capitalism. long-term investment. long-term focus. is that a niche thought? >> i think it is mainly becoming slightly more mainstream all not whatliquidity is it once was and i think people realize that they have to go to
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investment positions for longer in the bond market. but it is also true in other segments. asther thing that we feel investors is a number of the , maybe thes environmental social governance risks are being run or something is not priced properly by markets. they only emerge over the longer term. so even if a company is at the borderline of social policy for example, employing child labor, that could lead to a consumer boycott for other products. anna: it has the potential to derail financials. >> a short-term trader does not worry about these things but like we think of risk. manus: who is doing at rest in terms of being slightly broader in the perspective? the americans, the europeans, or the asians? >> i think europe is the area
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where this is taken most seriously. they're pushing very firmly with companies to take a longer-term perspective. discussions in21 paris are trying to improve the reporting on carbon which is clearly another major long-term factor. anna: thank you for joining us. we are 30 minutes away from the start of european equity trading. the on the move team is up next. futures are virtually flat. anna: not that we are terrified about the short-term, but the futures are ready flat this morning. that will do it for "countdown." we leave you with "on the move." ♪
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johnny: welcome to "on the move ." we are counting you down to the european open. i am guy johnson along with jonathan ferro. jonathan: bloomberg's commodity low. hits a 14-month miners, bracing for more pain. anglo american drops to an all-time low. will he need to cut the dividend? china's trade slumps. for a fifth straight month while imports are off for a record 13th. guy: let'sguy: check out what the first news looks like with near a. has received as
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shot in the arm after gdp data showed japan avoided recession. the economy grew 1%. pimco is going for heavyweight names in an effort to reassure its clients. the company has announced former fed chief ben bernanke, gordon brown, and former ecb president john claude tree shea will be part of a new global advisory board. deaton sayste angus europe's economic prospects are worsening as it struggles to absorb a wave of asylum-seekers. the winner of this year's nobel economics prize says there is danger the eu could buckle under the pressure of the refugee crisis. for more on these stories and others, head to the terminal and guy: let me tell you how we are looking at the open this morning . fairly flat story. islooks like the euro stock
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absolutely flat. london is up by about 1/10 of 1%. the dax, a little firmer this morning than most of its peers. that's with the bloomberg terminals are telling us. overnight come interesting. jonathan: apart from the fact i won a seat of the table of the pimco advisory board with gordon w tn, i am looking at breaking 40 yesterday. $40.97 on they, brent contract. we are looking for it to drop below that. the oil market and commodity markets come in focus. guy: let's talk to michael metcalf. strategist.l market we thought that oil was stabilizing. we were wrong. commodities continue to get pushed down. where is the bottom? michael: it's clearly not here. i think there was some expectation that perhaps opec would have done something with
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supply, and of course, they haven't. that has kept the pressure on. tie it in with the weakness in the chinese data overnight. there is an element of demand, which is also soft. i think this is not necessarily that great for the global outlook, and in terms of inflation, we thought we were just getting excited about inflation coming back. if oil keeps falling, that's not going to happen. jonathan: we are going to have a conversation about that with you . . looked at the lack of deals the sharp-lg deal, it's a most one third of the volume. these guys want certainty. they don't have that now, do they? there are people talking about 20. when do you start to see the deal volume pick up in the energy sector? michael: the one thing that gets me, six months ago, we are valueg -- were looking at
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in energy stocks. as you say, we just need to find stability. the stability actually could and is most likely to come from global demand. we know there is excess supply. your supply didn't get shrunk as much as we thought it might with things like opec. if you get global growth around 3% next year, that's what we need for commodities to stabilize and for deal volume to come back, for people to have the confidence that, we are going to grow in real terms around 3%. guy: we are going to have excess supply on the oil market for a long period, and then you've got to start unwinding the stocks we have already built up. the tail on that is going to be absolutely enormous. michael: prices are adjusting for that. the inventory side, the supply side is already pretty well known. we just need to have the
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conference on the demand side. we are still waiting to see the adjustment from the shareholders. the volume of output has fallen, perhaps not quite as much as we originally thought. jonathan: the bloomberg commodity index, it's not just oil but iron ore, copper, a complete downturn. the demand side, where does that incremental global growth come from? michael: i might've said china before the data. jonathan: exactly. michael: the global economy is in an adjustment phase. five years in a row now, people's overhead view is that global growth would be above 3%, and we've been wrong five years in a row. that's the private sector. [laughter] in the pimco community, they all got their forecasts wrong, as well. what is going on is the adjustment to the fact is that
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we are getting used to the fact that china isn't going to be growing in excess of 7%. guy: where does the global demand come from? is it from the u.s.? everybody seems to think europe is going to normalize. angus eaton talking overnight about the fact that europe is probably in for an economic shock as a result of the refugee story. if it's not china, where does the growth come from? where is the engine? give us the extra cylinder that we need to add into the u.s. michael: did i managed to avoid the question last time? [laughter] of consumerms demand, global demand is going to be centered around the u.s. the u.s. could trend around 3% next year. europe on the consumer side is doing ok. you will see that in the gdp numbers this morning. there are always risks to the european outlook, but consumer demand is improving. here is the interesting thing about putting the ecb into perspective. the fews one of
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continents that hasn't missed growth expectations, or barely. there are engines of growth. they are not quite as spectacular as they have been. guy: michael, we've still got so much ground to cover, michael metcalfe. he is staying with us. coming up come as iron ore falls below $40 a town, can miners dig their way out of this increasingly deep hole? ♪
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jonathan: good morning, and welcome downjonathanback. ftse 100 futures are up by about 10 points. 20 minutes away from the open. here is nejra cehic. nejra: oranges said to be in talks to buy -- [indiscernible] boygues rejected an offer in june.
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the news comes as morgan stanley plans to cut as much as a courtroom of its -- a quarter of its fixed income stock globally. the news comes on most three months after the bid was rejected. it would've been the biggest energy takeover in asia. guy? below $40 a ton , as prices approach breakeven costs. only in february, rio tinto's thetold bloomberg tv that $30 mark was a "fantasyland." >> i think that is fantasyland. it may be on a buyer wish list. it simply can't happen, if you look at the impact on the broader range, the cost of supply. we are right down at the bottom, as i mentioned, making very
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healthy margins. [laughter] guy: bloomberg's reporter jesse osberg joins us along with michael metcalfe. jesse, we are in fantasyland. it can't happen. here we are. be fair to sam welch, we are not at $30 a ton but we have a 30 handle, and futures indicate it's going to go lower. to me, this is a supply story. for the year, they are up 1%. these mining companies have flooded the market with cheap, supplies. until we see higher cost producers exiting the market, there is no rebound insight. to me, this is a supply story. they've got huge tailwinds with currency depreciation in brazil and australia. refueling is much lower. volley on friday said they'd 30 oneoducing for
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dollars a ton, but they think they can get it down to $25. that shows you how these producers are able to drive costs lower and lower. jonathan: miners always talk about cash costs. sam welch said $19 a ton. look at the breakeven cost, and it's a different picture. if you look at the sector, we've gone back-and-forth about this so many times. bhp, rio, valle. at what point do we get to the line in the sand where they can no longer play that strategy anymore? ofring up the ubs estimates where the estimate of where the breakeven costs are for these minors. where is the line in the sand? jesse: that's a good question. i think that number is going to keep retreating. it's a moving target. until we see higher cost producers exit, i don't think there's any hope in sight for a rebound. that's just going to squeeze these guys.
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guy: what is the proportion of their costs that is fuel? work out the input costs. 40%, 30%? >> it would be single dollar figures, i think. guy: so everyone dollar that oil the feed across is significant, and at the margin, quite important, but what are the major costs that they can take out of these businesses? jesse: you've got labor, shipping costs -- largely out of their controls. guy: shipping costs will come down, too. jesse: it's a race to the bottom. guy: who has the best opportunity? who has the best opportunity to deal with that and survived the longest? valle, theyrio, will be around for the long term. for you, a question michael. you look at this sector, the challenges of the diversified miner -- we are going to talk
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about anglo american later on -- is it better to produce one thing, focus on that, and be the lowest cost producer, focus the majority of your revenue on iron ore, one thing, as opposed to being a glencore, being an anglo? is the diversified model being challenged? michael: i think one of the challenges is all commodities moving together. you haven't had the benefit of diversification. you see the same thing across financial markets. there hasn't been a benefit from diversification. the shortest answer is yes. jonathan: to that point, anglo american, the stock is at an all-time low. cynthiae memories of carroll, the dividend, what happened with her. se: it's the worst kept secret in the mining industry that anglo is going to cut it. the latest report is they are going to cut it, cut it perhaps
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today. there's an announcement due at 8:00. we will have more clarity as the morning progresses. more interesting is the way this could be perceived by the broader mining sector. anglo are most likely going to switch from a progressive dividend policy, which means they are committed to increasing their dividend every interim. that is clearly an unsustainable policy in a cyclical industry like mining. they appear to be the first to release which from this progressive dividend to a payout. the big question, will bhp and rio tinto also ditch the progressive plan and switch to a payout ratio? guy: is there debt sustainable? depend onwill commodity prices. it will give them more headroom for sure. guy: what you think of the credit story surrounding this? you've seen it with the oil industry, u.s. drilling, the concern surrounding covenants and credits and its ultimate impact on the wider world. do we fully understand yet how
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credit is going to react to all of this? you see commodities being dragged lower. where is the break point? where does it snap? michael: i think it's a big risk. that's it's a concern high at the top, a credit event related to commodities, and there's a question of whether that happens in the u.s. it is already happening in the u.s. -- in brazil. what we would argue is that credit is one risky asset that investors are still pretty overweight. i think it's a big risk. jonathan: final question for you, just appeared gina rinehart, 60 billion tons. give me some context on how big that is. why now? jesse: she has been building this for many years. she's got a family tradition in the iron ore industry. her grandfather pegged the original iron ore tenements in the 1960's. this is the biggest commitment
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she's made in the industry in her life, a $10 billion project, 60 million tons a year. that's maybe 5% of the seaborne market. it's a significant contributor. guy: are we building the next super cycle in commodities right now? this is a big project that is coming on stream. five years down the road, 10 years down the load - road, these are long cycle projects. michael: if you want to go really long-term, the valuations are there. jonathan: michael metcalf, great to have you with us. thank you very much for giving us your time. in its way from the open in london. we are looking at potential corporate movers. it's all about air france. futures in london, a little bit higher. ♪
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jonathan: good morning. welcome back.
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we are nine minutes ahead of the open. futures in london, up by 12 points. let's pass over to nejra cehic who will walk us through the stocks to watch. nejra: i'm going to start with anglo american. you were just talking about it. this stock is the second worst performer in the ftse 100 this year. it has been hit by the commodities slumped with iron ore not least among that. we know that has dropped below $40 per metric ton. basically, people with knowledge of the matter have been saying anglo-american could cut the dividend as soon as today. are expecting to get a statement at 8:00 a.m. london time. stock, eye on that particularly as the investor day gets underway. moving on to air france, the company said today passenger traffic was affected by the paris terror attacks. 1%t occupancy fell by about
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in the wake of the atrocities and that shaved about 50 million euros off revenue, but the company did said the impact won't be big enough to hurt 2015 targets. that stock has been called a little higher by some analysts. higher, keep an eye on french telecoms orange and bouygues. according to people familiar, orange is an early discussions about buying bouygues's telecom and media assets. any potential deal, bouygues could carve out its construction unit and retain a minority stake in combine media and telecom. keep an i stocks and on anglo american. guy: thank you very much indeed. let's get more with michael metcalfe from state street global markets. we've talked about the oil prices. we talked about the downward trajectory thereon. if we carry on doing what we are
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doing, how low does inflation go, and how undermined is this base effect jump that central banks seem to be relying on? nejra: michael: the short answer is in the next three months inflation will probably still go up, in the sense that the stakes are so large. what the big problem will be, we will get to the end of the first quarter, and inflation will still below. it will not have risen as much as central banks have forecast. the real worry is market pricing for inflation is still really low, and of course, central banks use that to measure inflation expectations. as we've seen with the ecb, you have a low current inflation rate. jonathan: commodity markets, one thing. the labor market is an important variable. i've got to play master in economics with you. , japanesechael economics is at a 20-year low.
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me, for michael: i can't. exactly. [laughter] look, for instance, put the ecb in perspective yesterday. the very fact that they were easing even though growth more or less met their expectations for the year, it's not that they have revised down their expectations for growth this year or next year, but they still eased, it's symptomatic of a focus on the current inflation rate, not the forecast. the current inflation rate is too low. that's how you square the circle here. it's all about the current level of inflation. metcalfe, youael are going to stay with us. coming up, the market open in europe. five minutes away. futures are little bit higher in london. it's all about the miners.
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withbrace for more pain the bloomberg commodity index at a 1999 low. this is "on the move." good morning. ♪
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jonathan: good morning and ."lcome to "on the move i am jonathan ferro in the city of london, seconds away from the european trading session. guy johnson has your morning briefing. bloomberg's commodity index, hitting a 1999 low. we will look at the implications of $40 oil and the drop of iron ore during the program. miners are bracing for more pain. anglo american, dropping to an all-time low. we are waiting for news on that stock. will he cut the dividend? that is the expectation. china's exports slide 43rd straight month while imports decline for a record third team month.
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amazing stuff. stuff.n: amazing where are we? about 15 seconds away. futures in london, a little bit higher. nejra cehic has the european open. nejra: i do indeed. let's see how markets are reacting to the china data, the drop in both imports and exports. asian stocks weren't immune. we saw a drop there. markets, ituropean looks like the ftse 100, pretty much flat. we are seeing a little bit of a slowdown. what stick it to some of the stocks we are watching this let's look at some of the stocks we are watching this morning. keep your eye on these two stocks. people have been saying that orange is an early discussions about buying bouygues'skeep telm and media assets. what could happen in this potential deal is that bouygues might actually carve out its construction unit and maintain a minority stake in the combined company.


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