Skip to main content

tv   On the Move  Bloomberg  January 8, 2016 2:30am-4:01am EST

2:30 am
anna: welcome to "on the move," 7:30 in london. we are counting down to the european open. i'm edwards along with jonathan ferro in new york. good morning. jonathan: good morning. let's get everyone updated. the china flip-flop. authorities scrap the circuit breakers after less than a week of use. another volatile trading session as state-controlled funds are buying stocks. production run over. china has an eight-day streak of cuts in the yuan reference rate, sending shockwaves through global markets. jobs day. the december payroll report is said to be scrutinized following the rate hikes, amid intense market volatility. you wake up this morning and see
2:31 am
the chinese news, and you almost forget that actually it is payroll day. anna: by now. encrypt -- -- i know. it crept up on us. so much value was wiped off global equity markets. the chinese situation does look different, and many asset classes look different compared to what they looks like from the start of this week. it's not as if we are operating in an environment where there are no controls on chinese equities and no intervention, but some of those asset classes are rebounding. oil up by more than 2%. jonathan: it feels a little bit like tuesday morning, the calm after the market storm. if you wake up this morning, the calming influence of the pboc, cutting the yuan reference cuts, that has been stabilized. you just wonder if you will get more of that in 2016. do we get more market volatility? and as you say, that stock market in china isn't a free market by any stretch. anna: the pboc did not surprise
2:32 am
anybody with its fx statement today, and that seems like pretty good news compared to what we have had so far this morning. can we haven't really talked about payrolls, and we will do that during this show. let's get to the first word with caroline hyde. caroline: thank you. german industrial production unexpectedly fell in november, led by investments. outputs ingested for seasonal swings, which slid. it's a for #that a slowed -- it emergingh sign that markets may weigh on economic growth. after a tumultuous week, chinese markets are up. that is after state-controlled funds intervened to support stocks. yesterday, regulators scrapped the four-day old experiment of circuit breakers. they had also moved to stabilize the yuan. saudi arabia is considering plans to take it state oil company public, according to a report in "the economist."
2:33 am
owns 10 times as many oil reserves as exxon, and would likely eclipse of the largest in the world. and you can get the u.s. jobs data today. the report will be closely watched. 200,000gains at or near would probably provide some reassurance about global effects, but a lackluster report would add to that wall of worry that has washed over the financial market. anna. anna: thanks, caroline. less than half an hour to go into the start of the european agree trading day, so let's have a look at the futures. jon, we have a positive start to trade indicated. you can see the euro stocks crawled up around .5%, ftse also, and some decent gains coming through elsewhere. the tech scene is a bit of a laggard. it looks like it will be a very different day from what we saw
2:34 am
in equity markets yesterday, and we have a jobs report to come later on today. an interesting conversation with nick nelson earlier, where he talked about how this is a narrow corridor in terms of how markets receive it -- and it's to look good enough, but not too good. and the weather has been warm, but not too good if you are one of those investors. you don't want the fed to hike interest rates too many times. jonathan: maybe we will be taking our cues from payroll later, but the wider market is very much china. let's switch of the board and go straight to the chinese currency. uanlar-you wan stabilizing. were concerns for a lot of people who were already concerned about china, so some stabilization this morning and a helping hand for chinese stocks. not just for chinese currencies but domestically. it is not a free market by any stretch of the imagination this morning, but stocks are rallying in china.
2:35 am
dollar-yen has a bounceback, and brent crude -- big headlines in the commodity market yesterday -- a little bit of a bounceback. to the top story -- china in a volatile trading session after the government scrapped the circuit breaker system. speaking yesterday, pimco's executive vice president weight in. -- wadeighed in. >> there are questions about china and its policymaking tools. the wisdomwill and to navigate through the current turmoil, and it is showing that it does, but it is still learning by experience in some ways. manus: bloomberg news robert gatebert joins us now -- what ae they hoping to achieve? did the market reaction catch them off guard? think they had
2:36 am
underestimated the reaction that would happen. we saw the 7% slide in stocks, we saw a 7% yesterday. i think they didn't expect this kind of very sharp reaction. they were trying to depreciate , butnshore yuan i think they miscalculated what they were trying to do. all of this raises a lot of questions, one of them being that heading into the review on november 30, china had kept the currency stable for several months. it spent $400 billion up till november to stabilize the currency. so is china going back on its word of keeping the currency stable, allowing for your movement of capital? that is something that is really concerning everyone in asia and around the world. anna: is there a broader question around credibility that we need to answer?
2:37 am
we saw many promises about stability and transparency coming from various chinese authorities ahead of the inclusion of the yuan in the imf special rights trying basket. is this just a big learning curve? >> i think it is a bit of a learning curve for them, and we have to remember that china is not in that ye. i think it is better than all this volatility with wild moves on the market before they get in. however, they made an interesting point today -- the offshore yuan went up, the gap went up to 2.9%. he points out that, according to imf rules, no country can maintain multiple currency rates, which spreads out more
2:38 am
than 2%. that is apparently in violation of one of the imf roles. they have a few months to go so we will have to see what happens. anna: interesting point, thank you. let's welcome our guest, matthew beasley. matthew, great to see you -- happy new year. seems like so much as happened. give us your thoughts. let's look at the week that was, conditions,et of amazing actions being taken and then undone by the chinese regulator. how do you look back? >> i think a lot of bearish investors were expecting 2016 to be difficult, but no one was expecting it to start with explosions. especially after china. i think there is a concern that the chinese authority looks like
2:39 am
they are in control but -- like they aren't in control. they need to be a self-assured, steady, calibrated series of moves, and with the circuit breaker removal, the fluctuation in the currency -- it doesn't look like the central bank is in control. i think that is unsettling a lot of investors outside of china. jonathan: as an investor, what concerns you more -- the fact that the currency is depreciating by 1.5% over the days, or the fact that policymakers just don't seem in control? is that the latter that is more important to you at this point? >> i think that's right. , to somehe reason extent -- it is better that moves in currency happen now rather than later this year. it is the actions or the inconsistency, or the apparent lack of consider direction by the authorities that is
2:40 am
unnerving t investors. robin used the word learning on the job -- that is a scary thought for investors. they are learning how to influence and implement reform on the move. that is unnerving. anna: that is what they do with their currency flow into your decision to go near the chinese equity markets are not? i know you haven't been all that -- you don't go to emerging markets t generally. what kind of conditions do you need to see to get involved in chinese equities? investing see us in china in the near term. but clearly what is going on in china is influential for the rest of the world. as developed market investors, you worry about japan, clearly in the context of what is occurring in china, and the depreciating yuan is a sign of risk of deflationary exports, of
2:41 am
products and services and goods, and that has negative context for the whole of asia. anna: interesting. us. stays with up next, our morning must-read. we get a view on why now is the time to buy chinese stocks. that is coming up next. ♪
2:42 am
2:43 am
2:44 am
manus: good morning -- jonathan: good morning to you all across the city of london. 60 minutes away from the start of the trading session, ftse futures up. call it, after the chinese market storm. caroline hyde has your bloomberg business flash. caroline: thank you. signs are mounting that the global smartphone market is receiving after samsung missed estimates. experts have been waiting for
2:45 am
markets to mature and is the chinese economy slows shares of apple closed below $100 yesterday, for the first time in more than a year. vw made by back tens of thousands of diesel powered cars in the u.s. in an attempt to placate regulators, according to bloomberg sources. the german carmaker expects to repurchase around 50,000 vehicles, saying it would be cheaper to do so then fix them. meanwhile, the embattled folks like an boss is to meet -- volkswagen boss is to meet with u.s. regulators. they asked for the meeting after the justice department filed a lawsuit that could see the fines in the tens of billions of dollars. anna? anna: thanksanna:. let's get to the morning must-read. chinese stocks are a buy, according to david ficklin, who thinks the market turmoil the lies opportunity for a bargain.
2:46 am
he says investments reach their most attractive valuations when there is blood on the streets. right now shanghai is a wash -- it is time to buy. t allnot talking al about german fixed income, his point being that there is value in the chinese market. matthew, you artie said you aren't a big fan of the markets, at the point it is making is that when you look at some of these individual stocks, they make up a larger proportion than they do in other major industries. if you get rid of the froth, there are some fairly valued stocks. >> he is correct. if you look at what these companies are, you will find the vast majority of them are state earned enterprises. they are companies that i would suggest our discerning, that the corporate governance -- it is
2:47 am
always done the best interest of the shareholders. jonathan: in terms of the bumps in the street cliche that people always rollout, you didn't really need to see that much blood to go out and buy the bid. what seems to be different going into this year is that central banks seem to be less supportive of the market, whether it is the thatal reserve or the ecb really didn't seem to be too bothered that a disappointed market expectations. is that going to be a theme for 2016? for that matter, is that strategy dead and buried? >> well central-bank watching has in part of the, process for seven or eight years, and it seems to be a key part of it. i thinkook at markets, of all the things that make me nervous about it and it is quite a long list. but there are things that could be more positive, and two or
2:48 am
three of the most prominent involve central-bank action. europe, another surprise move by the boj. i think it is central-bank upsides that we need to be cautious of if we are bearish on markets. but i think a lot of the upside could come on the economic side, and while the underlying issue remains that markets are troubled, the internals look stressed and fractured and could have some worrying signs, record profitability tops out. it is about the internal market dynamics, which look pretty impaired. anna: when you look at u.s. stocks, you are concerned about how so much of the growth story is dominated by just a few names. these much discussed fan companies. if you strip those out, the growth we have seen in u.s. equities doesn't look as strong
2:49 am
as it might have been. >> absolutely. and that is the issue. if you look at the u.s. economy, the central bank is raising rates because the economy is improving. it has been a warm winter and that is good for construction activity. you won't have that negative weather impact we saw last year. so economics look ok. this year it is market internals, very narrow in the u.s.. valuations are high. profit margins are at or above record peaks. interests are bolstered by shared buybacks, can credit markets are showing signs of stress. it's the internal market dynamics that make me nervous. economics don't seem to be a big driver of the way markets are going. anna: the share buyback phenomenon last year -- thank you. matthew stays with us. minutes away from the start of
2:50 am
the european equity trading day. look at the potential corporate movers with caroline hyde. will it be a calm after the storm and markets, caroline? caroline: that is coming -- anna: that is coming up after the break. ♪
2:51 am
2:52 am
2:53 am
jonathan: good morning to all of you from the city of london and across europe. it is just stay here in the united states. the estimate of 200,000 for the month of december is one to look out for this morning. the calm after the market storm, china seems to be stabilizing. let's cross over to caroline hyde for the stocks to watch. caroline: we are talking about the ripple effects through the united states in terms of jobs numbers, and i am looking at the ripple effects of one u.s. juggernaut. apple is going to be wreaking havoc for a few suppliers here in europe, and of course the same some numbers that came out are all painting a rather gloomy picture when it comes to smartphone sales. ¢ an apple will look at the
2:54 am
semiconductor, but keep an eye on ams as well. yesterday we saw apple slide to under 100 fro the first time in more than here. they ares in the u.s., with significant apple exposure, and they preannounced downward revisions to the fourth quarter sales. an asia supplier is also saying their december sales tumbled 31%. a quarter of the revenue comes from apple. clearly there is doom and gloom in the smartphone market and it will hit the suppliers. meanwhile, lookout for bg group. it could be a bit of a pop on the open. we have seen oil companies hammered so it could be a bit of a reprieve, but it seems as though that deal from shell is getting close. on ceo put out an interview the company website saying they are on track to complete by the start of the year.
2:55 am
and we are seeing most of the shareholders report that they could be about to back this particular deal. proxy advisory body is expected to advise it. watch out for bg and vw. i can't get my head around this. 500,000 cars to buy back. and lastly, g4f. remember that backlash after the limbic some london? more backlash, saying they have problems with their own staff conduct. back to you. anna: thank you. coming up, the market open. we are minutes away from the start of the trading day. futures suggest it will be higher. the handover from asia is very different. ftse 100 suggests we will be up by half a percent. some brightness in the sky, and perhaps in the markets. the oil prices bounced a little than 2% on the news
2:56 am
that oil prices are up 1.9%. things look different in the currency market. we will return with the start of european equity trading. ♪
2:57 am
2:58 am
2:59 am
jonathan: good morning and welcome to "on the move." we are moments away from the start of the european trading session. stocks gain in a volatile trading session. reduction run over. day streakan eight to cuts to the yuan's rate. and it is job a day. the december payroll reports after the rate hike and the intense market volatility. jonathan: we are 20 seconds away
3:00 am
from the european station. the dax is up by 38 points. huge a bounceback, not a one, but a bounceback never the less. caroline: a bounceback is expected. $4 trillion out of the global market capitalization. that is more than germany aaron's and one year in terms of annual gdp. -- more than germany earns in one year, in terms of annual gdp. china is doing everything they can to stabilize. of course, we might be saying an end to the experiment with circuit breakers. 3/10 of 1%.s up have a look at the euro. 's production is not
3:01 am
looking pretty. we have the all-important u.s. jobs data. ahead of that, we have the dollar pushing up higher. we are up for tenths of 1% -- we 1%.up 4/10 of we see money going into oil this morning. it has been a doom and gloom week for oil, but it is up today. oving withen much m the yen this week. pound is still lower against the dollar. the pound was near the lowest since 2010 yesterday. here is a quick look at stocks.
3:02 am
apple weakness once again and samsung weakness. the bg group is up once again by 1.9%. vw is up. some homeere is they can return. anna: i am not worried about jon's spending power. let's get an update on what has been happening in the asian markets. nejra: the asian markets have quite the turnaround. shanghai changed directions a number of times in the sessions. at the close of the day, it was up by 2%. still, a nice recovery rally after the difficult week. shares are up as well. investors are trying to find their feet when it comes to how
3:03 am
confident they are about the rebalancing in the economy. of 1%.0 is up 4/10 we also saw significant losses for a fifth straight session with the s&p. sydney stocks are dragged it down on the back of that oil story. energy majors are decline. the focus was on china, really. this is how we ended up. shanghai is sitting under the level. we had a dip earlier on in the session, but that continued decline prompts these reports. also, intervention when it comes to the fx market. down by 10%.
3:04 am
next week, we're looking ahead to the chinese gdp. we should be bracing for more volatility across asia to come. jonathan: the situation in asia is that then. in europe, the 5100 is up by 3/10 of 1%. the dax is up by 34 points, 1/3 of 1%. china, china, china is the same. china volatility. stocks extend their rebound. equities are being bought again. the missed earnings by samsung. and then, it is jobs day in the u.s. ♪ anna: now with china dominating
3:05 am
markets and headlines, there is no been shortage of commentary by some of the biggest names in finance. predicted to be down 5% or 6%. it depends whether the chinese are good to their word in terms of letting markets clear. they have not. orit goes down more than 5% 6%, who knows. >> this is mainly a financial issue in china. the economy is slowing, but not collapsing. moreover, the chinese government have a lot of policy instruments that can soft plant the economy. in less you believe this will turn into a gutwrenching financial event, there is not a hell it willce is hn be worse than 2008. by in large, it is capital
3:06 am
spending. capital spending, when it slows down, it has a very negative multiplier and accelerator impact on the economy. i think a recession is not unlikely. jonathan: let's get more on the news out of china. we are joined now from hong kong. they give for joining us again. the turmoil, you just wonder how much they underestimated the reaction in the market. or whether it cut them off guard. reporter: it seems the ferocity of the reaction took them by surprise. they try to let the current currency drop organically. since china look at regained entry to the sdr, it 2.6%,ed currency by upsetting global markets this week. we had trading halts monday and
3:07 am
thursday in shanghai. it was almost disappointing this morning when they did not do anything to fix it. anna: almost disappointing. we are discussing trang transparency. investors asking for more information. whatever china is doing, they need to communicate more with us. reporter: there was a lot of confusion monday, tuesday, and wednesday. what exactly is the pboc trying to achieve? the chinese policies are more inward looking, rather than outward looking. if you remember, the pboc is not the only central-bank to carry on practices like that.
3:08 am
in 2013, it was said the federal reserve would taper off and lead to a lot of tension in emerging markets, a lot of capital outflows from the emerging markets. it was a pretty rough time. is doinga and the pboc is trying to shake out the speculators from the market, but they could definitely communicate with the markets better so there is not a run on the currency, which defeats the purpose of opening of the market. anna: thank you. still with us, matthew beasley. things are calmer after that storm we thought earlier this week. we are talking about anglo american, one of the stocks that was hit so hard.
3:09 am
index sank by 4.1% yesterday to its lowest level since 2004. is there any part of the commodity spectrum that you find any clues about where we are going in at this story? >> not really. demand is clearly being called zinc andtion on the nickel side of things. there is evidence that there is some supply being withdrawn from the oil markets. the real cure for lower prices is even lower prices. that forces producers to scale back on production. this will force more producers to reconsider their suppy plans for 2016. right now, we are worried about
3:10 am
demand and the evidence of a stabilizing asian economic demand environment. that will keep the lid on any price bounce. jonathan: from a top-down perspective, there are so many reasons to be pessimistic about the stocks. the ftse 100 is only bouncing back 1%. it is stabilization, yes. but when you look at the bloomberg terminal, what are you looking for that gives you signs of things are stabilizing and turning the other way? >> i look at the u.s. jobs report. i don't think the world is facing a huge global economic slowdown. i think there is a divorce right now between market internals and the economic outlook. ist i fear as an investor the negativity brewing with markets impacting economic confidence.
3:11 am
that will be very crucial over go next three weeks when we through a reporting season. we will see what corporate is telling us. corporate invests in opportunities to grow their own businesses, improve margins, and grow earnings. that will be key to markets from here. the lack of growth or lack of potential is always stressing the market. anna: is your strategy about the individual stocks? do you like the individual stocks in the telecom space? what is it about these companies right now, are they investing? >> all three of those subsectors are growing independent of market outlooks. the telecom market is undergoing internal reform.
3:12 am
regulations are getting less onerous. pricing path will pay more for higher data speeds. this is great for suppliers. we are looking for markets that can mark regardless of the economic outlook. -- that can work, regardless of economic outlook. anna: thank you, matthew beasley. up next, we discuss investing in the u.s. today is the first jobs day of the year. ♪
3:13 am
3:14 am
3:15 am
jonathan: good morning to all of you across europe. good morning from new york city. it is payroll day. that will be the story this morning. 1/10 of 1%.up they brutal we cannot much of a bounceback. let's cross over to caroline hyde. caroline: thank you, jonathan. the german production unexpectedly fell in november. from october.% slowdown in emerging markets, like china and brazil. after a tumultuous week, chinese markets ended the session
3:16 am
higher. that is after state-controlled funds intervened once again to support stock. yesterday, regulators scrapped their experiment with circuit breakers. bank may to stabilize the yuan. we get the u.s. jobs data tod ay. gains at or near $200,000 will provide some reassurance. a lackluster report would almost certainly add to the worry that has washed over the financial market. back to you. is stillthew beasley with us. we are waiting for the job report later today. all things macro and u.s. are in focus. we have a flat open coming through here. how positive are you about what is happening in the underlying u.s. economy at the moment? at the end of last year we spent
3:17 am
a lot of time worrying about high-yield bond markets. some said high-yield bonds predict recessions, but don't than a materialize. bond market goes wrong in the summer because of the gas industry. this is why investors are now paying attention. historically, the high-yield market has been able to predict corporate stress. we look at the 10 year yields in the u.s. you can see policy stress. be goldilockss to really, not too hot or not too cold -- and the environment. that willoo hot, scare many investors. if the economy is weak, people will suggest the fed made a mistake in raising rates at all
3:18 am
and look for further easing. the corridor of market satisfaction that will keep most investors happy and get markets up is very narrow. almost so narrow that it pays to bet on outside results. jonathan: the optimistic investors will look at the high-yield market. the consensus is to strip out the old story. my question to you would be for a question that is now producing 9 million barrels of oil a day in the night it states, can we really look at the u.s. as we used to 20 years ago when it was half of that? it is a big deal for the u.s. can you really strip out the effect? >> i would say you can't. the ratifications of the lower oil price spread far beyond the first and second iterations of where it is spent. you see shops that have been
3:19 am
overexposed oil share areas. makers are softening. you can see the ripple effects of a much lower oil priced oil economy and the regional impact spill over into a much broader range of sectors. are wrong. you it is wrong to strip that away and say, don't worry about it. it is a big deal. anna: how much does that translate into problems across the corporate sector in the u.s.. you make the point that high-yield is struggling. but generally, corporate profits are very high in the u.s.. if anything is going to challenge those profits, it would be higher interest rates and the inability to pay debt. this is why it will be so crucial. on have corporates sitting margins of high cash flows. what will corporate's do with
3:20 am
these cash flows? they could take the view that outlook is uncertain. they see where market levels in general are and decide to batten down the hatches. many othermpact industries. start totive loop will unfold and negatively impact the economy. just wrap this up. given the amount of pessimism we have discussed, going into 2016 you are in the wealth preservation business, why shouldn't i just go to cash? white should i still have -- why should i still have my money in equities? >> i think there are still pockets of interest and hope. there are certain stocks it would like to back. we have still been picking stocks that would go up, despite the market.
3:21 am
but you are right, cash will play an increasingly important role. britain might be a better market than north america and asia. we are talking about "less bad" rather than "outright good." these companies have still been exposed to the problems in north america and asia. it would be difficult for most equity markets in 2016. there will be stock specific activities and sector specific activities. cash absolutely, will play a bigger part in people's portfolios in 2016. anna: thank you, matthew beesley. produces itsany pricing report. despite uplifting factoring orders that came out earlier this week. we go to berlin next. ♪
3:22 am
3:23 am
3:24 am
jonathan: good morning and welcome back to "on the move." up, but if you look at the data from germany it does not look so great. the slowdown on emerging markets is weighing on the european economy. let's go to on's nichols. hans: one month ago without we
3:25 am
were out of the woods. but we see here is industrial production disappointing us and coming in at 0.3%. the estimate was that 0.5%. if you look at the three-month average, it gets worse. it is at 0.3%. one month ago, we were looking at a 0.1% increase. both of these indicators are volatile. factory owners yesterday came numbers came out yesterday stronger than expected. industrial production is troubling because we have not seen a strong bounceback after that summer low. that could be an indication that something funky is going on with german gdp. this morning, but is down more than 7% for the week. china weighing on germany?
3:26 am
ans: trade surprised on the upside it little bit, but there are clear concerns that the overall trade number came in at $23.6 billion. that is the surplus. if you look at their trade with china, it is cause for concern. you can also take a look at the chinese and german numbers after france and the netherlands. this is why you see a lot of action in the stocks, at least the auto sector. this is bad news for the german auto sector. anna: thank you very much, hans. we are going to take a short break. up next, we get back to our top story. that of course, is china. we talked to a guest. we have a real divergence of opinions about just how much the chinese currency will be devalued. we of interesting comments coming from the manufacturer of
3:27 am
aircrafts. those words are coming in by e-mail this morning. they say they remain confident on the chinese economy. ♪
3:28 am
3:29 am
3:30 am
jonathan: good morning to all of you across europe. stocks are bouncing back without much conviction. the stoxx 600 is up 1/2 of 1%. the dax is up about 80 points. the ftse 100 is making a little come back, up almost 3/4 of 1%. leading the gains on the index is tesco. glencore is up there as well by 2.4%. anglo is up there as well by 2.3%. switch up the board to let me guide you through some of the
3:31 am
other asset classes. we have a rally in chinese stocks. funds helped the market raise by 2%. let's cross over to caroline hyde. caroline: we have actually got some driving on the higher side of things. one of them i want to point out is one i pointed out earlier. tesco, once again, leads the charge. another company, another set of analysts say tesco. there is optimism surrounding how good these numbers could be when they come out. and mainly, how cheap this company has now gotten. they feel this is now time to buy. any are now cutting their overall price targets. tesco,
3:32 am
it is one of the leaders in the pack. many stocks are moving today on the back of analyst recommendations. up by 4%.tal is this will be helping producers and south africa on steel. . we are getting a help from the government there. keep an i on these stocks. many of the supply is our only downside today. we saw apple below $100 or the ofst time in a year in terms its stock price. samsung prices are below estimates. are having to downgrade their overall outlook for sales from the u.s. and asia. it aims as though smartphone weakness is starting to -- it seems as though smartphone
3:33 am
weakness is starting to hit the stocks. anna: the shanghai composite is ending the week much lower after a few volatile days of trade. regulators halted the new circuit breakers of just four days of operation. the chinese decision to suspend action has been agreed upon, but it is said they did this at an odd time. >> the economy is slowing, but it is not collapsing and it is important to make that distinction. moreover, the chinese government have many policy instruments that can soft land the economy. the worry is that they lose control of the financial slide. to have seen them start less influence on the offshore currency market and that is of concern to people who follow this closely. talk now for more, let's to a deputy chief economist at
3:34 am
asia economics group. great to have you this morning. i have spoken to people with a range of views about what is happening to chinese currency. some say they are aiming for a 10% devaluation against the dollar and that is what we are witnessing here. others say, no. what is your view? >> we are in the 10% devaluation camp and are looking for an adjustment. we expect, we would not be surprised to see it happen this weekend, if necessary. what we have been seeing in ch ina is that its policy efforts accompanied by the exchange rate policy and
3:35 am
capital slight. is monetary seen base growth. that has been contracting sense of temper. that will suggest that actually, we have had a policy tightening. and we need to reverse that through the exchange rate policy and a devaluation. jonathan: what we have seen is capital outflows in the fx reserves. i want to put that together with the ability to respond to a slowdown in the mainland economy with rate cuts. is it important for them to cut rates? the capital flight is increasingly driven by markets coming to terms with the chinese economy slowing quickly. as a mentioned earlier, they are pursuing policy easing.
3:36 am
these are being diluted by the exchange rate policy. offtting the r&b in a one devaluation, and that is really important because if they continue with the depreciation strategy, that will link her rich more capital slight. a one off will curtail capital flight, especially if it is sent out with a strong signal from the pboc as an opportunity to move money abroad. ld help stem the self,al flows and repeg it as well as undo the tightening that we have seen. that in itself will help stabilize the chinese economy. anna: if they did do this one currency, andthe
3:37 am
you suggest it will come as early as this weekend, how do they convince investors it is a one off? because if they don't do that, this continues to create unrest. >> that is why it has to be significant devaluation. it cannot be 2% or 3%. anna: we heard from them in recent months that they were not going to devalue their currency. has said that. how can they then go through with a big devaluation of the currency? >> what we see out of the bank boc, itn and the p is justified. the r&b has lost about 6% since june last year and the markets have been in an uproar. the relative, in 2014, the euro was down by the dollar.
3:38 am
it haslook at the yen, depreciated by 25%. the fact that china has also been accepted by the sdr and im f and we were just talking about a realignment and one off, if it is a significant enough there is no reason to believe it will not be accepted. especially if they send out a strong signal that this is a one off. anna: so, emphasis on communication. >> which they have not been great at so far. that is part of the problem. anna: up next, samsung warns of a challenging 2016. earnings come below analyst's expectations. ♪
3:39 am
3:40 am
3:41 am
jonathan: welcome back to "on the move." we are live from new york city. this is the global headquarters here at bloomberg. pointse 100 is up by 47 this morning. 42 points,. the dax is up 6/10 of 1%. the attention right now shifts to energy, the worst-performing
3:42 am
sector in the world index over the past year down 26%. you might think it is an odd time to consider floating an oil company. what about what could be the world's largest oil company? elliott, talk about doing this at the bottom of the cycle. why? >> i guess it is a defensive move. of course, the saudi's had an interview with the deputy crown prince. they, of course are really suffering from plunging oil prices. the deputy crown prince himself tod this had the potential bring more transparency to the company and boost the local saudi stock market, which would open it up to investors. yes, i suppose in an ideal scenario you would be dealing with a company at the peak of the cycle.
3:43 am
we do not know exactly how much the company is worth. it could be humongous or just ready big. we don't know a huge amount about its revenues or the workings of the company because it is pretty secretive. it is state-owned after all. it does have 250 billion barrels of oil. of can come to an evaluation $2.5 trillion. that is what? about five times the evaluation of apple. of thoseil has 1/10 oil reserves. orth 1/5 of chevron.
3:44 am
is potential for corruption here. alwaysese things, we look at one extreme. evaluation isrue somewhere in between. anna: that seems like a fair assumption. what happens if the saudi's decide to go ahead with this? if and i a very big think the deputy crown prince chooses his words carefully. he said he was enthusiastic about the opportunity, but it was something to be reviewed. they have not yet decided what to do. if they do proceed, they could have an ipo for the parent co.pany, au saudi aram going't know if they are
3:45 am
to go ahead. they may have decided to go ahead with it now because of transparency or to boost the stock market. this would be a pretty good idea. what they may do, given this is the crown jewel of state assets, they may wait to decide what money or funds would be generated by privatizing other industries. for example, using subsidies for water, electricity, and water. it depends on how desperate for the money. then perhaps, they could make a decision about what they will do. anna: thank you, elliott. let's get to the bloomberg business flash with caroline. caroline: apple has bought the artificial intelligence start up. people's motions as they watch video.
3:46 am
they seek to build smart software tying together their numerous products. backs tens of thousands of diesel cars in the u.s. they will purchase around 50,000 vehicles after concluding it would be cheaper to do so than fix them. vw will have to meet u.s. environmental regulators next week to discuss the fallout from the emissiosn ns scandal. they could see fines and the tens of billions of dollars -- ofes in the tens of billions dollars. anna: samsung posted disappointing numbers today. what can you tell us about the details here, caroline? how much is this a corporate story and how much is this a bigger story? caroline: i think it is both
3:47 am
because there are alarm bells ringing across the industry. profit was amiss to the tune of about 9% below estimates. they still brought in $44 billion worth of sales. the sales were basically flat on the previous year. we have seen concern not only on the competition front. ripe, but also, there are alarm bells of slowing smartphone demand across the board. the biggest smartphone producer in china might not meet its own $80 million target -- its own 80 million smartphone target for 2016. apple has been speculating that they can cut the output to the tune of about 30%.
3:48 am
,hat has really hit suppliers as well as the apple share price. meanwhile, we have had a host of suppliers downgrade their supply forecasts. clearly, there seems to be some stagnation. what is interesting with samsung is it does not just make smartphones. it makes televisions, displays, and chips that go in arrival smartphones. it is slightly protected from its own smartphone slowdown. they now have a new head of phones untit. that head used to be in the payment services area. this man knows software, rather than hardware. thank you, caroline hyde. we are 48 minutes into the session. stocks are coming up a little
3:49 am
bit. 8/10 of 100 is up by 1%. we have some signs of stabilization. we have the first u.s. jobs day of the year. we will see why these job figures may be particularly significant. are they always the most important numbers ever? ♪
3:50 am
3:51 am
3:52 am
jonathan: good morning and welcome back to "on the move." points thisp 89 morning. a little bit of calm after the start of the year. it is payroll today. the data is released at 8:30 u.k. time. 200,000 jobs are set to be added. lot to watch. payrolls, wage growth, and the participation rate. let's cross over to an edwards for a look at the day ahead. anna: in fact, we have had comments overnight. on matters ranging from china to modernization we have this to say. >> problems in china affect other emerging markets and that affects the demand for u.s.
3:53 am
product. we have to take that into account. even with that, the analogy to what happened in 1999 and 1998 is apt. we learn to there it was very easy to overestimate the effect of slowing asian growth on u.s. prospects. i think we need to be cautious. >> i am not really expecting that we will see a time of prolonged deflation. that is negative, right. i think we might be challenged to get inflation up. anna: turning us now to make sense of what to expect in the payroll numbers is richard jones. great to have you on. to say,ht be heretical but a lot of people talk about the u.s. jobs report and how it is the most important data. of course, the focus of the fed is on inflation.
3:54 am
when we are not talking about u.s. inflation, we are talking about the deflation from china. what room do we find to talk about the jobs report? >> i think it will always be an important report, but the point john made is important. the average hourly earnings are what we need to watch for. the bloomberg estimate is that we will get a bit of a drop in earnings. given the fed minutes that we saw where they are concerned about inflation, if we don't see that jump, that will make the report today interesting. jonathan: this is not necessarily a science or an art. it is something in between. you expect the payroll gains to roll over to some extent. do you think the market is able to read through this? richard: i think this will be a difficult one. we have a number that deviates
3:55 am
very far from what we expected. i think you will get volatility. but again, i think you have nailed it yourself. it is all about the earnings today. that will anna: be the key metric going forward. anna: and when it is not about the earnings, we have had a lot of conversations that suggest there is a really narrow path walknumber has two through. if it is too strong, people worry about the gradual path of interest rates. if it is too soft, people worry the fed should not have raised interest rates. richard: people are looking at the goldilocks factor. they don't want it too strong or twooo weak. it is about the trend. one number is not going to deter the fed too much. we need to look at today's data
3:56 am
with the rest of the data. we were talking about the cpi data later this month. if this, coupled with the rest of the data, can give us a clear picture of what the u.s. is doing, i think. anna: thank you, richard. stay with bloomberg television. "the pulse" is up next. now, looking more positive. 9/10 of 1%. is up we have a bit of a bounce in the material stocks. we saw a big losses in anglo and glencore. those stocks moved a little bit lower in the trading session yesterday. jonathan: we are one hour into the session and the dax is up by 1%. the 5100 is up by 1% as well. the correlation continues between stocks and oil. what a morning.
3:57 am
thiss payrolls up next for market. good morning to you all. ♪
3:58 am
3:59 am
4:00 am
jobs in the u.s. as the market prepares to scrutinize numbers in search of good news. state sponsored rebound. chinese stocks gain as authorities scrapped their circuit breaker and national funds are set again. investors remain on edge after losing $4 trillion in four days. welcome to "the pulse" live here in london. i'm francine lacqua. let's chin

29 Views

info Stream Only

Uploaded by TV Archive on