Skip to main content

tv   On the Move  Bloomberg  January 5, 2016 2:30am-4:01am EST

2:30 am
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. in london. counting down to the european open china with state-controlled funds after the billion-dollar market route. vw sued. carmaker faces penalties after a u.s. justice department lawsuit. data setone inflation to show how far the ecb is from
2:31 am
making its targets. we should call it the calm after the market storm. the protection team getting to work early in 2016. guy: how good a job do you think they did? they managed to stabilize it, i guess but it shows you that they threw a lot of the market today and it still finished softer. in china remains incredibly fragile from a sentiment point of view. jon: we don't know what the counterfactual is. several things back in august where you got slammed 7% slammed again. if you are an investor in china and see the market down 7% you think, what does this mean for me? the policy response is more indicative. that is a big concern. when you're down 7% and wake up and get the state backed fund to work, it is the response from the chinese authorities that gets people a lot more concerned
2:32 am
than the market movement isolation. guy: that probably is true and i think we will have to see a lot more of it. we will actually be seeing this is a phenomenon throughout 2016 is the trek to manage the process. the chinese authorities are going to have to be ready sharp on their toes to get that one done. we will talk what john in new york and be here in london. let's get you the first word news with caroline hyde. caroline: throw zone and cpi data is not to show inflation at 0.3% up from the previous month. that still leaves the ecb target rate of just under 2% as a distant goal. the world's largest asset inager says they struggled 2013 -- 2016. there is 0.9%.
2:33 am
that's up 2.5% according to the world bond entities. is obama administration broadening the definition of who qualifies as a gun dealer. that qualifies as executive action. smith & wesson and stern ruger rose the most in three weeks yesterday. x although it is my strong belief that we need to get our complete arms around the problem, congress needs to act. my team to do is to see what more we could do to strengthen our enforcement and prevent guns will -- from falling into the wrong hands to make sure that people who are criminals, mentally unstable and those who could pose a danger to themselves or others are less likely to get it. caroline: if you want more on those stories, go to the
2:34 am
terminal. guy: i want to bring you a bit of breaking news. orange confirming that it has renewed talks with the week group. seems as if the consolidation process within that second is going to be kicking off on the front foot in 2016. no guarantee there will be an outcome to these early talks as they are being described it the confidentiality pact has been signed. member, martin week out -- ouygues out. maybe too compelling for him to ignore the opportunity. but it looks like they are back in talks and they are at an early stage. we have been talking about what is in china overnight. the market finishing softer, but here in europe it looks like we
2:35 am
will be starting today on the front foot but the dax was down over 4% yesterday. let me show you what we're looking at on the fair value terminal. the euro stock the opening of about 1% in the dax will only bounce back by around 8%. the footsie and the cac 40 maybe a little bit armor will stop that's hated that function. it will provide you with an early look at how the european markets are going to the opening. jon: it was the china proxies that really took a hit yesterday . he saw that whether it was copper or elsewhere. we saw that there is well. and with the big headline yesterday was that despite the saudi and iran tension, brent crude finished the session lower on the day. marginally but lower and that is the headline worth looking out for. this morning we are lower once again with euro-dollar trading just almost $1.08 flat.
2:36 am
a weaker euro ahead of that. let's call it the eurozone payroll figure. it's eurozone inflation and at that is just off of a low. guy: all of the centering around china and the old -- oil story at the moment. reducing to be the two things driving the markets. we will talk about the weather later on but let's get active a china story. china believed to using state-controlled fronts -- funds to prop up the stock market. people today believe the banking and steel sectors are among those being supported. let's get out to shanghai. what welk us through have seen from the authorities because the market still finished a little bit softer. yes, this isn't the first time that the government has intervened by buying up large cap of state owned shares.
2:37 am
they just started the circuit breaker. it was the first day yesterday and they are -- this was originally designed to stock -- stop plunges in the market similar to the one we saw last july. they don't what this to fail so they are willing to do almost anything to make sure this new circuit breaker system goes in and columns the market. jon: this was the big concern about -- among some of the people that the six-month ban was about to expire. have we learned anything new this morning? is it going to get pushed out for the, wrote -- pushed out further down the road? >> according to our sources, it looks like a are not going to n.d that ba
2:38 am
it was scheduled to end on friday. that was the sixth month when they first took those measures in july. according to our sources they will just leave it in place. more signs that they want the market to calm down and stabilize. guy: thank you very much indeed. gregory turk joining us out of shanghai after what has been another volatile session. let's get the thoughts of our guests for the next hour. he is the investment director at london and capital group. it is not the start of the year we hoped for. it's been volatile china once again front and center. >> i think it will be very volatile. the most important thing about the chinese equities is that the shareholders and the initial shareholders have used their existing assets to raise margin loans. was we had earlier, it
2:39 am
demanded of the collateral should not be marked to market. you have a lot of loans extended to the owners of the businesses and the large investors who are then leveraged on the back of that. to stop the whole of the market caving in the have tried to stabilize it by making sure the collateral value was not marked below the market and that they are postponed from serving for a long period of time. in essence the market has not found a free level where holdings can be cleared out. it means it will remain in a managed format for all of the year. the best that you can expect is a very volatile market going tight for this year. jon: it looks the huge outside moves.
2:40 am
what did you learn yesterday? anything new at all? >> what is new is the fact that the pmi data coming from the u.s. and china all indicated that the slowdown continues to theown and is on track with economy growth rate projection that most people have had from the official agency. all the way to the investment banks will be our expectation. so probably also the employment growth prospects have been overestimated and have been listening to the expectation. the bill also begin to sound a little too optimistic. eurozone inflation data gained way below the 2% target. we admit there will be pressure
2:41 am
on both the ecb to come in. guy: we can see corona on the tape right now. not2% inflation target is sustainable without some degree of wage inflation. you will have plenty more that we need to get from you throughout the show. up next we will talk blackstone. he has done it for 31 years. what is he seeing? oil continuing to slump. u.s. stocks getting hammered. the dollar getting hammered. andarp decline in london new york property prices. that is what we're looking at now. ♪
2:42 am
2:43 am
2:44 am
2:44 here in early
2:45 am
new york. futures positive, 15 minutes away. dax futures up 103 points. looking for a bounce back this tuesday morning. your bloomberg business flash with caroline hyde. caroline: next has blamed the unusually poor weather for poor fourth-quarter results. sales rose by just 9.4 per -- 0.4%. growth margins were maintained. the u.s. justice department suing volkswagen, accusing the automaker of installing illegal devices to cheap emissions testing. in federalnt filed court in detroit is the first case against the company brought by the justice department. eq t partners has emerged as a strong contender to buy the swiss travel opening. they said that they received
2:46 am
preliminary approaches. they insisted there is no certainty that an offer will be made. there is a u.s. stocks selloff. blackburn's -- here is what he said. a list he has been publishing for over 30 years, back to 1986. hillary wins. u.s. stocks go down. the fed will only raise rates once. u.s. equity markets have a down year. causesk american economy overseas investors to reduce their holdings. i am assuming that he thinks it needs to be long euro. but interestingly enough he has it going to 120. oil sticks around 30. he expects that high-end real estate in both new york and london have a sharp downturn among places like russia and the
2:47 am
gulf disappear. that is pretty much in contrast with some of the things we're seeing. number.a city 12% for global equities. more of the low end 7% rise. here are guest joins us from london and capital group. >> that is very optimistic. you think about what has happened in the last five years. we should not expect any further markets. corporate to be the earnings. corporate earnings growth are slowing down significantly. in the commodity prices in part because of the stronger dollar.
2:48 am
corporate earnings quarters are probably high single digits and that is the kind of return you should expect from the equity market in the u.s.. something very similar in the u.s. but if we get more qe, the likelihood is we get slightly better growth. projectionsrnings could be slightly better but you get a small margin. equities probably slightly better than the u.s. equities but then the currency may be under pressure. you really need to head to currency risk otherwise as a u.s. dollar investor you will surrender again because of the strong. dollar for the next six weeks persony be the only surprised by byron surprise index was byron himself. 500 rent back to 70 --
2:49 am
in print back to $70 -- brent back to $70 per barrel. a pretty bad call. this is a surprise forecast. are they useful to you? >> what we have seen the last couple of years is that the forecast tends to before ridley optimistic and they are based on the premises that you get much better corporate earnings coming through and continuation of liquidity's destroying the risk assets. reale at a point where earnings need to grow for the equity market to make any progress. but this is precisely the time when the first indications are that wages are beginning to pick up. there are pressures on the margins coming through and what of the boost to the corporate earnings were the huge share cheaptaking place on the availability of trade but we are probably coming to the peak in the share buybacks and might
2:50 am
ease back a little bit. again is quite extended when you take out the cash roots in the tech sector and so on. the rest of the equity market is already leveraged quite hard and from here on it goes sideways. that means the benefit of the corporate earnings front on the margin expansion is behind us. forwardns that the looking will be much more subdued. we're looking within five and 10% for the realistic expectation in the big markets. thank you. he is staying with us. nine minutes to the open. the dax might have to say he is not going to bounce back by much but we need to look at some of the individual stock stories to focus on. next is one of them. uygey as well.
2:51 am
story whens on that we return -- we will focus on that story when we return. ♪
2:52 am
2:53 am
2:54 am
guy: six minutes to the market open and caroline hyde has the stocks that you need to be watching. retailers and vw plenty of names to be watching. likely to fall on the back that they are overall being sued by the justice department. i want to show you this chart. this is how concerned they are about the weather. they put this into the press release. they want to really spell out how much variation in the british weather has hurt their sales. and we see a spike upward how much temperatures were higher than average, down go the sales. down -4 million pounds almost and they say look again toward december. this is how much higher we saw temperatures. down go their sales. they are going to so many links
2:55 am
to try to show you that this is white their sales were awful. way below analyst estimates. we are seeing a big miss. 0.4% higher in the run-up to christmas. estimates were for 5.8%. they are significantly below were estimates have been and they are cutting their full year overall view on where sales would be. 46%.were meant to be but overall they said we will give you a special dividend trying to sooth the nerves. this will send shivers down the spines. not so sure that shivers down the spine is the right phrase. john, what is happening on fifth avenue? jon: one of the warmest christmas here in new york on record. and you saw it, the sales, jackets and coats. this is not just the u.k.
2:56 am
phenomena about that weather story is massive. look out for the market open. we are about four minutes away with futures higher over in london. ♪
2:57 am
2:58 am
2:59 am
jon: welcome to "on the move." i am jonathan ferro. we are moments away from the start of european trading at guy johnson has your morning brief. china intervention. state-controlled fun said to be buying stocks after yesterday's $590 billion market route. the market in shanghai finishing softer. vw sued. scandal hit carmaker faces billions of dollars of penalties from the u.s. justice department. the eurozone inflation data due out this morning set to show just how far the ecb is from meeting its inflation mandate.
3:00 am
jon: ahead of the open, futures open and germany and frankfurt, dax futures up. a big selloff yesterday. this is the calm after the market storm but let's cross over to caroline hyde for your market open all stop >> you said it. $590 billion wiped off a chinese stocks yesterday. that is equivalent to the entire annual gdp. it's bigger than that. lostrday the stock 600 about a quarter of a trillion euros for market for you patience. ftse 100 up by about 4.7%. a slight bounce back. that really wasn't the case and you're looking at asia and you will be digging into asia with the reports out there and a moment. money at are throwing the situation, china trying to steady the ship. trying to store money.
3:01 am
still it is a sea of red. we are warming up and seeing green in european stocks. member we are getting cpi data today. that 2% target of mario draghi. weterms of risk aversion, are seeing risk appetite when it comes to metals. -- gold is inch vogue. when it comes to brent, we are not seeing much there. but gold is up 0.2%. a little bit of m&a in the air, a little bit of suing in the air as well. this big stock to watch, next. these stocks are likely to sink. because next numbers are so poor over the christmas period. they have just 0.4 percent
3:02 am
growth with the market looking for 5.8%. next is met to lead the charge meant to be the company that wasn't so -- still affected by warm weather but it was. people didn't buy their coats over christmas and down go the sales. next putting in 0.4% growth. brand sales way off. vw off by 3%. remember that the u.s. is looking at a criminal investigation as well. vw still with scandal revolving around the emissions. ouygey telecom. could they be bought by orange? we have a memo sing the have reviewed their culinary talks with them. they are up 1.4%. jon: about two minutes 30 seconds into the open. the ftse 100 bouncing back marginally. let's just call it the calm
3:03 am
after yesterday's market storm. as for the rest of the show, here is what is cupping up. -- coming up. the government is set to have intervened in china to house the sinking stock market. the u.s. justice department files a lawsuit against the automaker. we will be live in berlin. likely tob is undershoot its inflation targets for the fourth straight year. guy: people familiar with the matter are amongst those being supported. we have also seen the pboc and the market. let's go to hong kong. robin, walk us to the action taken and the results generated.
3:04 am
so the pboc decided to inject funds into the money markets today. this is in reaction to them climbing when the pboc had laid off on adding funds to the money market. last tuesday, they decided to scale back their interventions. this was aimed at decreasing boring costs and the economy and aimed at calming investor concerns sparked by the 7% decline in stocks yesterday. part of a wide-ranging effort by chinese authorities to try and calm anxieties. bad,g if things go really we will have to stop the slide. jon: at the height of the selloff, a lot of people look at policy makers. they said they were exacerbating concerns by a panicked sponsors. getting -- panicked response.
3:05 am
getting ipo's. banning selling a full stocks. have they learned anything from the summer at all? now,e problem is that about 80% of china's stocks are held by individual investors. letting the stock market slide with so many of your citizens involved is a bit dangerous. now -- the done problem is they cannot keep supporting the stock forever. at some point the market will have to find its own feet. this sense a slightly dangerous message to people saying you can speculate but if there is a slide we will be there to stop things getting worse. one mustme time,
3:06 am
realize this cannot carry on the long-term. guy: but what they are doing is just managing the process. rather than just letting it happen in one big cathartic moment. they are just managing it to make sure those individual investors do not take a huge one off hit which is effectively what we are going to see throughout the rest of the year. >> like i said before. china has to devalue the currency to boost an economy that is expected to grow at the slowest pace in the more than 20 years. that said, most people are expecting that they will allow a very gradual managed depreciation. if your member when we had the stocks live from last year in august 11 devaluation, that sparked a kind of court over global markets. it caused a run on the currency and a run on stock markets. wouldk that what the pboc like to do is avoid that but at
3:07 am
the same time they have to have some kind of depreciation in the short-term. we have estimates of the currency declining 1.3% by the end of 2016. if they did this in one goat that would kind of spark panic and that is what the chinese are trying to avoid. at the end of the day, what this reminds us is that china is a very controlled market. it isn't free by a longshot as of yet. >> robin over and hong kong. iq for your insight. yesterday's market meltdown in china may have spooked investors but here in the u.s., fed officials in calm about the whole situation. the fed president isn't too concerned about the impact of the chinese slowdown and the impact it may have on the u.s. economy. tax we built and a weakening path for china and i don't see that as a significant risk but it is certainly a risk. trade channelect between the u.s. and china is not that large.
3:08 am
so again, will it have a direct effect on the u.s. economy? i don't build it in as a significant risk to the economy. that is the investment rector at london's capital group still with us. are they right to be called? -- calm? in september the fed was telling us that china was one of the international factors having an impact on the thinking. >> i think it is complacency simple because all the risk markets are in some manner connected to one another and in that sense when you have a risk mode it goes across the board to all of the risk markets. just like monetary policies in one country affect the other because we live in a system where money can leak through into the best available opportunities. the reverse thing happen when you get a flight to safety that tends to be across the board. low butct chances quite you have to look at the second and third round impact.
3:09 am
the takeoff of the oil is now slow down. deflationary pressures emanating from the energy spectrum. with china under pressure in terms of the growth and the stock market, it means if we have a devaluation we will be an export inflation coming out of china and most of asia will respond to that which means the u.s. inflation will start undershooting the 2% target. we are all connected and therefore it impacts all asset markets. to the extent that we are in a globalized world. jon: these are not open markets. our colleague pointing out quite rightly that this is socialism versus markets. in many way, the two are not compatible. you have so many retail investors in the market because you want to keep society stable.
3:10 am
what to set say about the future of china as they look to get engaged with open markets. can they actually do that? thehink we should not doubt authorities objective of trying to get stability and the stock market all stop you get a lot of volatility like we have had in the last two days but the important point is that yes, a large number of private investors are involved. 80% to 90% of the equities are owned which is the free-floating part. owned byposedly private investors. they have multiple accounts on their own main -- name. that is how much is owned by the insiders or the original owners of the business and how much is owned by the ordinary retail investors. remember that the equity of allip as a percentage assets is very small. it has a small impact on the consumption cycle.
3:11 am
to that extent the equity market does not necessarily impact the chinese growth trajectory directly. the market was meant to facilitate capital raising, especially the big ones where there was too much indebtedness. too much debt had been raised in the balance. it was an effort to try to get more equity content. boom while the phase was going wrong. the big part of the capital raising was going to be the financial sector. the banks. they held a big shortfall. until 2022 to get to the requirement. to that extent the market is probably going to be destined to go sideways. let's go get some volatility. i don't think the authorities will lose control. money beingh of the injected now will flow out of the country? how big a problem will that be and how difficult for authorities to manage? to the last back
3:12 am
few years when we had hot capital coming into china and the bank of china responded by making sure that the bank reserve requirements were held at high levels so that not all of the hot money was translated into the broader liquidity in the system. the reverse process will happen as the capital flight continues and the foreign exchange results continue to diminish. that means the reserve requirements will be reduced with the tightness in the money markets getting alleviated to an extent. the will ensure that economy gets sufficient liquidity and the cost of capital for the corporate household begins to come down. guy: thank you very much indeed. up next, the fed in focus. we will hear again from a member director, she has protections for u.s. growth. we will hear from her and a moment. ♪
3:13 am
3:14 am
3:15 am
jon: good morning to the whole of the city of london. stocks are bouncing back. 100 up by 0.9%. the dax -- that is not much of a bounce back with conviction. about the market throughout the program. the euro zone cpi data
3:16 am
out later expected to show 0.2%tion at 0.3% up from the previous month. the ecb target rate of just under 2% is a distant goal. economists say they are likely to hit it in 2016. we are at just 0.4% against an estimate of 5.8% increase. they said they did not discount stock at any time so growth margins were maintained. the world's largest asset manager looks to struggle and 2016. inasuries returned 0.9% 2015. global sovereign debt lost 2.5%. back to you. jon: federal reserve bank of cleveland president and fomc voting member loretta dismissed
3:17 am
concerns over stumbling stocks in these first trading sessions telling bloomberg tv that the u.s. economy extension was on solid ground. >> as we have seen over the last six years the u.s. economy has been growing 2% to 2.25%. the u.s. economy has come back significantly from the great recession and the expansion is on solid ground here. yorki have been in new about four days. when i come across investors there are two camps. some say the fed will hike it at once. there is another camp that say, we will get the four hikes. everything will be ok. the economy is pretty firm. where do you see it? >> i think i sit on the first one where the rate rises -- we
3:18 am
will be lucky to get two for the year. that isary reason for that what is happening out there in asia in terms of leverage and emerging markets the continuation of the downturn means that there is deflation still further from the commodity cycles and we will have the onslaught of the export of deflation from wider asia with the japanese likely to do a bit more qe. we have seen the chinese wanting to let the currency slipped a little bit and it means they will rely a bit further on the export cycle. we are coming from asia and that means the inflation in the u.s. is likely to be undershooting and therefore that gives space for the fed not to raise rates as much as they are anticipating. so what you are talking about is a fairly difficult economic environment to
3:19 am
navigate. certainly one that will be difficult to raise rates in. >> if you have diverting monetary policies you have the ecb and the bank of japan on the easing side. basically the fed and the bank of england on the tightening side. that means you'll get big movements in the currency from time to time. all of a sudden you get the imported deflationary impact. we saw last year how much impact that had. the export of growth because it effectively -- i think we will get a repeat of that this year. it means interest rate expectations, in terms of what the fed is expecting, are not too optimistic. some say it will be a lot less and i probably tend to side with the market that the market rise will be much slower and a much more prolonged process than the fed are indicating. guy: thank you for your thoughts
3:20 am
and time. joining us from london and capital group. we will take a break but next we will talk about volkswagen. new year, old problem. doj in theed by the dotted states over the emissions cheating scandal. we will have the latest from berlin in a moment. ♪
3:21 am
3:22 am
jon: welcome back to "on the
3:23 am
move." 23 minutes into the session. the ftse 100 higher this morning. up 54 points. autoig story in the sector, volkswagen stocks down this morning by almost 2%. facingman carmaker is further problems with the u.s. justice department filing a lawsuit against the company accusing them of's installing illegal devices to cheat emissions tests. hans nichols joins us from berlin. just the beginning. will this snowball? hans: it could turn into an avalanche. you look at the size of the fines from the department of justice at the behest of the environmental protection agency close to $80 billion. before they were talking $18 billion. almost four times as much. with each infraction they added
3:24 am
more, with the headline number this could be settled out of court but it is clear that volkswagen is in trouble. they say that selling cars without an epa admission certificate come a tampering with engines and telling to report the existence of the devices. volkswagen only set aside 6.5 billion euros, a small action of that 80 billion dollar headline number. the epa wants to set a signal and here is what they said in a statement last night. car manufacturers failed to properly certify their cars. they breached the public trust, and disadvantaged. competitors. they're adding up with each vehicle a lot of different competitors and a lot of confines. you have some 587,000 cars that could be affected. that is almost 100,000 more than we previously had been reporting.
3:25 am
it looks like what the epa and justice have done is added a three liter engine along to those two liter engines. they're lumping it altogether. there is no agreement between the epa and folks wagon on how you are going to fix those vehicles that have these devices installed. what the recall procedure is. here in europe, they are getting awfully close to the final solution. >> can we get back to this issue of sending a signal? doj being sopa and aggressive? take off your auto hat and put on your political ahat. hans: it seems clear they were worried about the level and the scope of the -- i don't want to say malfeasance, but the scope of the deception. they installed the devices but that they didn't
3:26 am
tell anyone and were secretive. it seems as though the epa is trying to set a high bar. when you look at actual damages in a civil case you have to look at harm. and what is the actual harm? consumers feel burned and that is a separate matter. harm of sending this nitrogen oxide out into the atmosphere? that was a question that will be in the san francisco courtroom. initially they filed suit in detroit. they will move it to san francisco along with some three to 400 different civil claims. you are a lawyer and you will be spending a lot of time in san francisco. hans nichols in berlin, thank you for joining us. 26 minutes into the session here in the u.s. and europe. the volkswagen stock down by 2% and equities bouncing back. iran and saudi arabia with tensions. what next from tehran and rio as they shrug off the evening route
3:27 am
between these two nations. good morning. ♪
3:28 am
3:29 am
3:30 am
jonathan: good morning and welcome back to "on the move." me and myryone but floor manager is asleep. 7/10 of 1%.up by the dax was smashed yesterday in the biggest one-day loss since august. it bounced back up by 3/10 of 1%. one of the china proxies got hit quite hard.
3:31 am
i am a poor man in new york. let's cross over to caroline hyde. : it did not have much in terms of overall sales for the christmas period. outlier meant to be the sold30% of its goods being home where. -- home wear. they say the warm weather is the main problem. combinedng with competition from online. it also had poured stock availability. meanwhile, it is not all doom and gloom for the retailers. tesco was up 4.5%. why?
3:32 am
itssche bank has upgraded stock. it is a backhanded compliment to tesco. they are cutting the earnings per share estimate and are cutting the price target for tesco. why are the shares rallying? there is a lot more to go for tesco. the margin progression could outpace rivals. therefore, get in and buy. the best performer is numericable. it is up 5.6%. they are looking at french consolidation, in general. could numericable win out? back to you, guys/ jonathan: let's talk about the escalating diplomatic conflict between saudi arabia and iran.
3:33 am
first, let's discuss the implications for the oil price. javier, in the past, middle east tensions would jack the price up. walk us through what is happening here. situationthough the is complicated, a diplomatic crisis between the two countries, nothing has changed on the floor. saudi arabia continues to pump a isord level of oil and iran about to come back to the market. the market is a discounting mechanism, but nobody is expecting these countries will enter into a war. at the same time, if we have any to cuthat opec is going production later this year, the hope now is that iran and saudi arabia cannot continue. the markets were expecting to the end of they
3:34 am
year and now, that has been postponed for the time being. guy: i want to highlight what you said. if i was to pick any market move through the session yesterday -- forget equities -- it would have been the fact that brent finished the session lower. as you look at things, is yesterday a continued escalation between saudi arabia and iran going forward. javier: if you think that what is going to happen is the price war between the countries will identify, you have to keep in mind that we will see iran coming back into the market. those will be fighting for the same countries. both will try to sell their oil to china, india, and japan. theiry begin to discount oil, that will impact the market negatively. the complications have been
3:35 am
with us for quite some time. why now? why are we seeing this escalation? very interesting, the timing. from a domestic, saudi point of analysts aref saying this is a move to show the mess to clean that the saudi leadership is being tough on terror domestically regardless sunni.her it is shia or from the iranian point of view, there could be some feeling that saudi wants to escalate tensions. jonathan: nobody is talking about the potential for direct conflict. the market has been pretty sensible about the prospect of that happening. a lot of people have always been talking about the proxy wars in yemen and syria. will those proxy wars intensify
3:36 am
now? is one thing we have to watch out for. think, as you said, i don't think that is in at the cards, but it will be interesting to see what happens with the talks in syria. i think stephan will be on his way to tehran later this week. the implication of these talks in its area will be very interesting. guy: the market has already priced in the return of a saudi arabian oil into the general market. i put that side by side with this story and the ongoing nuclear talks. what is the sense back in tehran? is this a done deal or are people hedging their bets. golnar: iranians are being much more optimistic. consumer confidence has
3:37 am
increased when you are speaking to iranians on the streets. there is always the underlying sense of, we won't believe it until we see it. date for theation nuclear deal in january will be key on the ground for iranians in terms of seeing that capital unlock, of seeing iran's oil production return to the market. jonathan: just a final question for you, javier. and year we sat here everybody was looking for brent and crude to bounce back and it did not happen. what are your contacts saying about brent and oil trade for 2016? javier: we are probably going to reach a low point for the year unless something big geopolitically happens. refiners get out of the winter
3:38 am
demand in late february or march and prepare for the summer arrival. i think prices will go still lower. we will see brent and wti trading below $30. the average price of the year has been revised down by every analyst. , we werer months ago thinking $60 on average for the year and now, they are thinking $50 a year. incrementally, they are thinking $45 for the year. using increasingly, investors buy protection for prices to drop significantly lower. jonathan: we will leave it there. thank you very much, indeed. retailer and the their christmas sales. damper onather put a big
3:39 am
the retailer's sales. we will have more on this when we return. ♪
3:40 am
3:41 am
jonathan: good morning. i am jonathan ferro, and this is "on the move." a bounceback in the european session. a bounceback without much conviction. the terminal screen shows
3:42 am
equities surging a little bit higher. one stock in the red is next, the u.k. retailer. 0.4% growth,n versus a 5% growth predicted. is notistmas performance pretty. caroline, talk to me. caroline: come in and have a look at how much this is underperforming. index is in0 retail the green and next is in the white. this is the biggest slump for next shares sensincee september 2013. 0.4%naged to squeak out growth. the market have been looking for
3:43 am
almost 6% growth. retail sales fell half a percentage point. they gained an excess of 3%. even though they tried to give some comfort to the investor promising a special dividend to be paid out in february, they are having to cut their outlook. they will say, look, we are only going to manage 3.7% growth. the air coming in at the low end of their profitability targets. the one thing that potentially hurt next was that they did not discount before christmas. atathan: next is really good execution and that is why a lot of people have liked them. people follow was happening with the weather and that is why the stock turned assault.
3:44 am
-- the stock turned soft. caroline: dividends are down. i want to bring up a chart. this is a fascinating one because one of the key reasons next is saying their sales underperformed was because of the weather. this is a chart they have put together in a press release, soaking to show to the market that it was the warm weather -- so keen to show the market it was the warm weather hurting their sales. the temperatures were about two degrees above average. sales then dip. the temperatures for about four degrees above average in december and sales dipped again. when it is unseasonably warm, we don't buy the higher end items. what is so interesting is analysts were thinking next
3:45 am
would be the leader of the pack because they sell so much home wear. they thought they would be a little bit protected. theally, it seems despite 30% sales for children's apparel and furniture sales, they were still hurt by the unseasonably warm weather. the online sales rose 2%, as opposed to the 10% estimate. they have poor stocks online availability. you can extrapolate out, this is about whether. they lead the charge when it comes to the first one of the doors for christmas sales. it is not a pretty picture they arender what shopping for because yesterday we had numbers out from the bank of england for unsecured lending. they say it is being ratcheted up incredibly aggressively.
3:46 am
mabye people are out there buying bikinis. jonathan: you are talking about the credit card purchases. on the unsecured lending side, i don't know how much they can actually do about it. we always sit here and talk about the weather in terms of the actual business. we joke about it it it goes to show, for retailers, this business has not changed a terrific amount. once you have that stock in the store, that is it. they are so inflexible with what they can do with it. this is one of the warmest winters and history. you still have the jackets and coats in of the stores. you can't just bring back of the spring merchandise. design has to change. guy: it will be interesting to
3:47 am
compare and contrast the online to how they've done. the weather seems to be rippling through every single story we have talked about, the commodities base, the retail space. i think we can't extrapolate back to the high-yield space as well. ishave already seen what happening with stocks like macy's -- they have been coming under pressure as well. jonathan: when you bring up commodities, everybody crossed their fingers hoping for a cold winter. that did not happen. what i will say, even with the pound at $1.46, i can get you some nice things in the sale ov er here. guy: we will talk later, mr. pfero. let's talk about inflation and
3:48 am
let's talk about draghi. inflation, we will preview that number when we return. ♪
3:49 am
3:50 am
jonathan: welcome back to "on the move." of 1%.0 is up 1/2
3:51 am
the dax is down by 4.2%. what would you tell me, guy johnson, about the next morning when we wake up and trading commences once again? would you have expected a little bit of a bounceback more than 2/10 of 1%? you have to wonder what the sentiment in the market is early on in the year? guy: you get the sense that that kind of confidence you traditionally would have people though,nk are just waiting. weight and use it may be a little later on. -- wait and use it a little later one. we have to wait and see how central banks will respond to this. we will get data out that draghi will pay attention to a little later on.
3:52 am
may berowth in the euro weaker than anticipated. data a littlei later on. hans nichols joins us now. jon, put it very nicely. this is an important number we are watching out for. hans: yes, except it will be the fourth year in the row the ecb will miss their inflation target. they are so far from meeting the target. the last time in early december, he insisted it was working. to 360eased billion-yean euros. this is the same conversation we had in december. they want to look into core
3:53 am
inflation and strip out energy. the price of oil is dropping down and you can see core inflation is bouncing around 1%. it is a much better picture, though to is not horrible and not great. we have had wage growth of 2%. that is very real wage growth and translates directly into their pocketbooks and can help with consumer spending here. in germany yesterday, we saw revision downwards. the expectation was down 1/10 of 1%. they have because of that, revised the overall number down. iswas for 0.4% and now, it 0.3%. later on i am going to take into all of the numbers and germany. the priceyou how much of brockley has increased over the month. i can't wait to get to the zspot website. jonathan: i can't wait to hear
3:54 am
about it. the payroll figure has increased over the last six years. i want to take you back to december 3. if this number disappoints, will people look to the ecb? i am not so sure how much more they can do. i was told they can increase the size of the qb program. that did not happen in december, why would it happen in the months ahead? tried to amend and extend his remarks, to use a phrase from the united states congress. he ended up pushing down the euro a little bit. if you look at where the euro is theing, it is down in 1.09-1.08 range. we will get factory numbers later this week and industrial production. that is a number they can live
3:55 am
with and they think it will help them. when you look at where the euro is, inflation has helped the manufacturing base. especially here in germany. jonathan: hans, thank you very much. what is the most important ?umber for draghi yes, inflation is important, but what about the employment story. >> strictly speaking, inflation is at the top. jonathan: it is their mandate. >> it is their mandate. i think they would look at the employment situation and see some green shoots they are they really have to be focused on the inflation number because that is what they are responsible for. jonathan: and what does unemployment look like? hans: the unemployment number in germany is 6.3%. they have the duel mandate in
3:56 am
the states with the fed. does seem that they are looking at price stability and following their mandate. even when you talk at what the currency is at, they always shy away from it. said, we don'te have a goal, but clearly, the weaker euro is helping manufacturers. on the flip side, you see the strong dollar it into profits on the u.s. sector as well. jonathan: the estimate was for an $8,000 drop. key is the france employment is at a 20 year high. you are talking about the court of europe there, germany and france. i think the story and france is the same as in other parts of your. you do have a two speed europe. that is what the ecb is
3:57 am
concerned about. they are making policy for all of europe, not for germany alone. jonathan: the markets are unconvinced at this stage that the authorities have a handle on it. we will do it all tomorrow. "the pulse" is next. ♪
3:58 am
3:59 am
4:00 am
francine: china steps in. after a $590 billion cello. -- seelll off as oil continues this decline. regrets. iran expresses her more sober the attack on the saudi arabian embassy. -- to "the pulse" live in london. i'm francine lacqua.


info Stream Only

Uploaded by TV Archive on