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tv   On the Move  Bloomberg  January 28, 2016 2:30am-4:01am EST

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jon: hello and welcome to "on the move." we are 30 minutes away from the market open. the investment side if they still does not look good. >> it is the first major bank for europe. deutsche bank we knew would be bad. not realize the detail that would come out of the investment bank in terms of the level of underperformance. every major division is down. that is not what john cryer needed to hear.
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cfo laterar from the on around noon. jon: i will break all of that down. mode at the fed. the central bank opened the door to change in its economic outlook. is a march hike off the table? deutsche bank reports a revenue loss. we will speak to the cfo later today. and the largest social network post another quarter of revenue. guy: a busy morning around europe. he is caroline hyde. hasline: deutsche bank
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reported a fourth-quarter loss at its investment bank as revenue at each of its businesses fell. they posted in that loss of 56 billion euros since 2013. do not miss our interview with the deutsche bank cfo at noon u.k. time. says bondnley investors should favor long-term securities after the fed acknowledged there are risks for the global economy. long data bonds stand to benefit most. facebook shares soared in extended trade. beath-quarter sales estimates almost 1.6 billion users every month. about 80% of revenue came from mobile devices and facebook continues to sell more targeted
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ads across its spectrum. away from thebits open. let's get a check on futures. a lot of corporate news andicularly around germany the investment bank posing -- posting a loss and revenue drop. dax futures down by 37 points. here it is. the shanghai composite is lower at the close, down by 3%. roundabout off by 10% this morning at 3286 and a u.s. two-year, that yield keeps going lower. down considerably from the middle of december when we were pushing through 1%. the fed decided there wasn't much of a decision to make but is a march hike off the table? that is the big story this morning. after yesterday, the federal reserve opened the door to the change in the economic outlook
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and possibly a slower pace of interest rate hikes. fomc said it is closely monitoring global, economic and financial developments. here is what some leading voices told bloomberg tv. >> there is a concern that it will not get back to the 2% goal. it said they started to move because they saw they were reasonably confident that they would get there. seen in changes in market-based expectations is that the markets are not so sure about that. that actually might slow them. >> they changed their balance of risk assessment by not saying anything about it at all and shifting the language from having a view on the balance of risk to reminding us that they will look at all these things and that will impact their balance of risk.
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>> in terms of fed policy, we think it will be more aggressive in july, august or september. not so much in the first part of 2016. the fed is taking a somewhat longer view in terms of inflation. >> with very little inflation pressure we're unlikely to see the fed seriously consider moving before june or much beyond that. >> i do not see any signs and i do not think the fed sees any sign of anything like a collapse. crowing thateen fast. slack -- sag will make it a little worse but we are not worried about a collapse. >> were not worried about inflation and we have a strong dollar at some of our largest trading partners are in qe. and we are in an election year. i don't think the fed will be aggressive for fear of pushing the economy back ahead of the recession. jon: let's welcome in andrew now, he is our chief -- guest
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for the next 40 minutes. in december, risks were balanced. you assume that are not anymore. is that right? a think we have both seen tightening in financial conditions that has been broad-based across credit markets and equity markets as especiallylation market implied inflation has continued to fall. both over the short-term and even long-term measures like five years. i think the fed, looking at a broad-based of indicators the balance of risks to the outlook as well as the trend in market-based inflation expectations has some reason to step back and say that maybe the events are unfolding weaker than we originally thought. --: andrew, can you quantify you talked about how the commissions have tightened and we see that in a number of areas. does that equate to one fed rate
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hike or two, as the market re: put those in place. >> that is a very good question. what we think and what economists think is the tightening and financial conditions you've had over the last year and the dollar is it big part of this. it could be worth as much as 100 basis points of rate hikes. i think that this is important. there is a lot of focus that the markets or down and the fed cannot be dovish. it cannot write to the market's rescue every time there is weakness. i think there is a strong argument that what the fed could be doing isn't knowledge and that tightening is already happening. you have had some pretty significant tightening that is slowing the u.s. economy. jon: the fed talks a lot about gdp, and inflation, the job market. they don't talk about the s&p
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500 and the credit market. his attic critical point? >> what is going on in credit and the s&p 500 is important. if we think about what is predominately driving a lot of the slowing of the u.s. economy and the weakness off of the data, i think you cannot get away from the dollar. at a pace has moved that has really only been seen four times in the last 40 years. that is having a huge effect at a time when as was previously mentioned many of america's largest trading partners are engaging in qe or major policy shift. i think the dollar is the dominant factor here. jon: andrew sheikh, stay with us. the deutsche bank koshi io -- co-ceo sees no need to raise capital. every business posting a revenue decline and the first question you would ask the cfo later today, do you need to raise
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capital. getting ahead at the market open at about 22 blitzing he sees no need to raise capital. late any headline a concerns of investors going into the open and beyond in the numbers today? >> is it enough to dismiss the calls in the rate capital? >> remember that the city called it inevitable that deutsche bank would have to raise capital. he needs that by 2018. a big part of that is going to be that's bank disposal ipo. that is supposed to happen in 2016. it is an awful long way to go to get to that number. as you laid out, every single division as a percentage number , q 15 or q 14 is down. that part of the bank needs to perform if he is going to be able to make good on that claim.
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jon: he says no need to raise capital sees 18 to 24 months and remains unshakable he -- unshakabley optimistic. up next, goldman's warning on brazil. bank says they have taken on a new meaning. it'lls across europe that bit lower, dax futures down by 48 points this morning. good afternoon to those of you in asia.
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the cityome back from of london, 17 minutes away from the city of london. it is much lower in germany. lots to discuss. let's cross over to caroline hyde. caroline: facebook shares soared in extended trade among another quarter of record revenue.
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every 1.6 billion users month. about 80% of revenue came from mobile devices. facebook continues to sell more targeted ads across the spectrum particularly using video. is an important part of the facebook experience and continuing to invest here is important to allow people to share and consume the most engaging content. 100 million hours of video are watched daily on facebook. caroline: samsung fell after fourth-quarter profit missed estimates. to 2.7 income fell 39% billion dollars, well below analyst average forecast. samsung has joined apple in warning of a top 2016 tech sector. interest and tax rose 2% on the so-called organic
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basis. that is the world's largest distiller posted better-than-expected sales. at 10 a ceo joins us clock a.m. -- 10:00 a.m. bloomberg time. jon: goldman sachs warning that the crisis in brazil will get worse before it gets better. the chief latin american os says thatm brazil is a mess. andrew sheets from morgan stanley still with us. a brief assessment of brazil using a football term, the number 10, not pretty at all. and funnily enough, the least of their problems as well. that is the story. >> the way that our economist framed brazil is that it is caught in the middle of three different unwinds. they are hitting the global
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economy there is an unwanted the commodity cycle. as an online with chinese growth and and unwind with the credit sector and all three are hitting brazil pretty hard at the moment. i think it's a major challenge for brazil. that being said when we talk about, when is the time that emerging markets turnaround, that has been a pressing question for a while now and it has been attempting to move into emerging markets as a value play. brazil is that bellwether for when things could get better. when thingsing -- in brazil start to look better, we think that will be the signal for a broader emerging-market rally. that yet but dm markets remain a better place to be. guy: how does brazil compare with some of the other countries we are watching carefully at the moment? and turkey,frica how does it stack up?
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we have growth problems and inflation problems. versuss it stack up that. >> i think that across all three, you have a pretty severe challenge. again, i think when we think emerging-market versus developed market and investment decision, it is fair to say that e.m. valuations have fallen significantly. our view is that the discount is not high enough given that fundamental challenges exist across some of the parts of emerging markets. it's not just brazil, it south africa turkey russia and china. even though valuations are becoming more attractive. i think in our view that we do not yet see enough instances where you can combine valuations and a turn in the fundamental picture to make it more instructive. jon: the story for the broader
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develop,.m., and i have you tried to play that in the last couple of months, you got your stuff into trouble. your line, this is a well advanced global equity bear market -- a lot of people are finding it hard to say those words. >> if we step back and think about the decline that we had, markets are down significantly since april of last year. since the height of optimism around ecb qe. it's happened in stages and even at the end of 2015 markets have clawed back a lot of recent losses. i think that is important to step back, when we are considering the fact that global data has been week. risks around the chinese currency has an weekend and you have also had a pre-severe equity selloff already. it is also interesting if we think about the last six years all stop it was such an easy time and markets rallied significantly -- that is not true.
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from january 2010 to the middle of 2012, 2.5 years, global equity markets went sideways. so what we are in is another point of those consolidation modes. we do not think there is in our base case another 10% downside from here. we do think markets will continue to chop along and that credit is a more attractive place to be than equities until he have more stability and clarity on the economic front. guy: what would another move by the ecb do? we did see a rally when draghi adicated that we could see reevaluation of monetary policy and equities did go higher. there is an interesting line floating around that we could see the ecb pushing the euro-dollar lower which has an impact on oil which ultimately will be negative for equities. so more qe is not good for equities which has been
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something of a reaction function but not consistent. probablyk we would look at the question more directly. come out and was more aggressive i think that would be good overall for a sentiment. that would overwhelm currently high correlations with oil which we think are probably unsustainable to hold for the longer term. that being said, the point that it is the dollar and the fed that is in the driving seat here. i think that the limits to what the ecb can do in the limits to what they can support global sentiment is secondary to the common factor behind a lot of the market concerns, whether it be, can china maintain currency stability, is close toeconomy recession, can commodity prices stabilize. back to the dollar and
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the dollar comes back to the fed. fx: on the ethics market -- market specifically, in october or december when it was almost a record high, do you just want to buy yen? is there still value? >> the real challenge of this current market is that it is very easy to be bearish and worried. data has certainly come in weaker than we have expected your today. trying to find things that are defensive in the current market and trade it reasonable the you wish is very difficult. so what we need to think about is what is currently combining both negative correlation or diversification benefits versus equities and reasonable valuations. very few things qualify in the yen is one of them. we like the yen, it trades historically cheap. it trades with that diversification benefit and volatility is also historically
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reasonable. jon: we will talk about japan and the japanese yen later in the program. let's cross over to caroline hyde. caroline: we are going to be getking to the cfo after we the devil in the details. that they are posting a full-year loss, the first since 2008 but every single division seeing revenues shrink debt trading in particular. raise capital. we will see how they react when the calls are lower. keep an eye on this one, some big calls this morning. -- and a german report saying that overcapacity, the increase is important and the political environment he says has dramatically changed his industry. he sang the materials business in particular need significant
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recovery if they're are going to keep their credit forecast. worrying times. this is a stock that could fall quite ferociously and could drop on the outlook. 3% to 5% lower it's been called as we see guidance for 2016 particularly on the weak side. and the first group, again at downward call. the operating profit view for the current year is slightly lower. out splashing our cash on the street. jon: thank you very much caroline. about seven minutes away from the open, deutsche bank in focus. guy, you will be speaking to the cfo later. thing to sayight on a morning like this but the numbers do not look good at all. they don't look good. caroline running through some of the details. every thing has a negative
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number on a percentage basis year on year. there are some core companies -- competencies here which are not firing on anything like the level they should be and that will be a big problem. he said himself capital target and he needs to deliver a mask. you can drop a correlation with the central banks a little bit here. they set up their store but how quickly does it take them to change that line? the fed beginning to show a few signs of hesitancy. the ecb coming out in march and making it clear that march is live even after it came out with that move on stimulus in december. willinteresting, how long it take him any more quarter such as the one we just had will it take that line to change. that's a decision the market will make right now. jon: lots more on butch a bank in the program. enter sheets still with us. we have come back a little bit.
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it's not like these are great entry levels, but as you say, the only valuation metric where it screams, "i stock" -- "buy stock" -- >> the stocks are certainly cheaper than where we started the year that we are not at levels where you can put your hand up and say that these are unquestionably cheap levels for stocks or cheap levels in a recession. i think that is important. that's one of the headwinds at the equity market has. thinks one reason why we credit markets are certain parts of credit offer better risk for warts because in many cases, spreads on higher yield or similar to the average recession already. there is a little bit more of a line that you can drop under the market. on the equity side, that is one of the challenges. even though we think a recession would be avoided the equity market could reasonably be lower in valuation here. >> we're just over four minutes
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away from the european market open all stop futures are marginally lower and deutsche bank is in focus. on the other side of the break, the open is four minutes away.
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jon: hello, and welcome to "on the move." i am jonathan ferro here in london with guy johnson alongside of me in frankfurt. let's get to your morning brief. weight and see mode at the fed. people are hoping they will change the economic outlook following economic turmoil. the company reports a loss at the investment bank as revenue from each of its businesses fell. guy johnson will be speaking to the cfo later today and investors like facebook post another quarter of record revenue, sending shares soaring in after-hours.
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ahead of the open, what are we? 15 seconds away with futures marginally lower. caroline hyde has your market open. caroline: we are digesting with the fed said, they are keeping their options open for march. many are feeling that they are closely monitoring. you have the pboc injecting cash. the most we have seen in three years coming from china, rest ridley trying to keep foreign costs down. they have today meetings kicking off today. will central banks ride to the rescue. u.s. selloff after the federal reserve. the ftse 100 off by 3 -- 0.3%. germany opening on the lower side. a bit of risk aversion when it comes to equities.
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we are seeing brent on the higher side. record stockpiles in the united states. tradingseeing wti crude in the u.s. coming off of those lows. that premium slightly moving apart from brent at the moment. oil is not really driving stocks lower this morning. a little bit of profit taking happening with gold at the moment. then we have plenty of data to get up into later today. 0.2% ahead ofp the dollar. will be see 0.5% growth of pickup in the third quarter? lots to be analyzing and lots to be digesting. as we say, waiting to see what the boj does next. we have had earnings thick and fast.
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interview with the cfo. we already knew it would be bad but it really is bad when you are digging into the numbers. every single business unit's showing a drop in revenue numbers. this is as the ceo is out in the press in germany worrying about his industry and overcapacity, about chinese imports. and the negative sentiment coming from the ceo. this is buses and rails, you know the stock in the united kingdom but it is likely to see a weakness after they say their full year is slightly lower than they previously thought. changes in the rail portfolio hurt but you and i are not spending that. we are sending it out now.
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guy: deutsche bank trading lower this morning. heremains unshakable optimistic but the market disagrees. shery: asia lacked today. the nikkei finished down 0.7%. report this morning showing that retail sales missed estimates. investors are a bit cautious about the policy decision as well as that closely watched prime data due out tomorrow. the shanghai composite fell almost 3% to the lowest level since november. this is the third consecutive day of decline. this managed -- managed to finish higher after samsung falling after profit missed estimates.
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stocks in new zealand gained slightly by 1/10 of a percent after the central bank there cap rates steady at 2.5%. but they said they could further cut rates in order to boost inflation. let me take you through some of the movers to suppliers in japan. samsunglunge after results showed slowing demand for the devices. japan all plunging today. and now go shema fell after the nikkei -- u.k. newspaper reported that sony will not perform a bid for the toshiba medical unit. bloomberg reported that foxconn maybe taking its case for an acquisition of the company directly to its major lenders. jon: that is the asian session four minutes into the session in europe. the dax down by's 0.6%. a lot is happening in today's
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program. deutsche bank, germany's largest bank posting its first full year loss since two dozen eight. around. doubles all they gain market share in europe. with, it is decision data the south african central bank. will it move in an effort to stem the slide. we'll go live to johannesburg. jon: of $1.5 billion loss at deutsche bank's investment bank. guy, we have had a series of comets in the last 30 minutes and it seems somewhat optimistic. should they be? to: i guess that they have say that. that is what you would say this morning if you posted these kinds of numbers. you cannot come out and say you are unshakable he pessimistic.
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currently andeo he says that he sees no need for this bank to raise capital. the markets clearly voting with its feet this morning. it's going to be interesting to see whether he can make that 12.5 number by 2018. the operating performance of the investment bank has to improve some of the key divisions like fixed income have to do better. that is the question that they are asking themselves. can that happen? bring an and your sheets to get his take on this. andrew, fixed income going forward from here, some of the key divisions that the deutsche bank rely on, what is your expectation? are we going to see more volatility going forward? what is the outlook for 2015 and 2016 into 2017? what do you expect those kinds
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of areas of focus will be looking like? are we going to see more already than we have seen at the start of the year. x we will see volatility continue and what will be interesting is to the extent that we see more of that volatility show up through fx markets. the challenge for the interest rate complex could be that if the fed is sounding more dovish, if the ecb is sounding more dovish does that continue to put a cap on how much yields are going to move around in the current environment over the next six months. at the same time, a number of the stories you have circling to macro markets from the strength of the dollar to the outlook for that renminbi to what will draghi do with the euro could arguably still have some pretty significant moves on the fx side over the next six to 12 months. on the credits i do have the uh and's that in some parts of the market are back to levels where they traded and averaged during the 2001 2002 recession. >> just to simplify the story,
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there saying that expecting restructuring costs to wipe out profits at the biggest in breath -- investment bank, you can restructure but it is even harder when the revenue environment is so tough. what really struck me about u.s. banks is the amount of cost cutting going on. haveop five u.s. banks costs down to the lowest since 2008. can you carry on squeezing costs at these rates? >> we're certainly at a tough point for the banking sector were they have the ability to continue to boost operations through cost cuts and lower provisions. it's going to run out of real estate. the banks going forward, it's a question of, can they continue to optimize their capital profile and i think that's very important. businesses, these the key question is not necessarily about growing revenue it is can they return -- deliver on a higher return on equity. across the sector, this is an
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industry trading at a significant discount to tangible or stated book value. real key is can they continue to optimize on the capital side. out.could be there one way guy: to pick up on that point, i 0.5% onutsche trade sub a book value basis -- you try to reach stocks at this bank and you try to do the cost story. you are maybe a bit behind the curve, with the markets that you see in front of you, how difficult will it be to pick out those bits were which are going .o stabilize revenue this is the challenge that he faces right now. he has to figure out where do i cut and where do i not cut? that looks incredibly difficult in the current operating environment. >> i think that's absolutely right. i think it is unfortunately very
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difficult. a problem that the industry faces is that like other industries it probably has excess capacity and excess capacity drives down margins and profitability and a number of banks are waiting for other banks to withdraw in order to allow that margin in that profitability environment to improve. been slower than expected and meant that the improvement has been slower than expected. unquestionably, given the announcements that have been made you are seeing people pulled back from these markets that should improve the profitability environment but it is certainly happening much slower than many were hoping it would. stock isdeutsche bank just off the lows down by 1.2 .9% this morning. next up, did show beats on first-half earnings. we speak to ivan menendez becoming much later on today on bloomberg television. guy johnson sits down with the
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chief financial officer of deutsche bank which posted a loss at the investment bank. ♪
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jon: hello, and welcome back. this is "on the move." diageo reported first-half earnings this morning --
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you ran the business there. are things bottoming out in the u.s. as far as you are concerned and his 2016 the year for improvement? >> let me say that our overall performance in this first half the 2% net sales growth has been very broad-based. the top six global brands which are about half the business are all there in growth. beer is growing 7%, emerging markets grew 4.5%. the u.s. is doing exactly what i expected. our underlying performance is uptickng, the consumer in this business is growing at about 3% and i expect to be -- expect to dude better. trajectory a great
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and is growing very nicely. the demographics are positive. we have a leadership position there and i am pleased with the changes we made an north america. we are getting good momentum and i expect strong growth in the second half of this year in north america. i just want to put forward one of the analyst calls this morning. they say that the numbers this morning may reassure the market but growth is pedestrian. they say pedestrian, use a strong. -- you say strong. why are you so convinced? the trajectory of growth in north america six months ago. the first half was exactly where we wanted it and we have the plans and the momentum in place to improve the second half. if you set back from diageo, where we are today and looking forward, i see momentum globally
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improving slightly in the second half, and then as we go to the medium-term we have given guidance and i have reiterated it today that this business will grow mid single-digit on a sustainable is this. we are in a spin -- fantastic sector, the growth and trading up that is happening in spirits and beer are very good. we have taken a lot of actions to improve the competitiveness of the company in the last couple of years. stay tuned. this is a story where i believe you will see improved momentum from diageo coming through. jon: but stock what the quarter we are currently in. we're almost a month down. much has been talked about in terms of the economy. feedback loops and financial market volatility, you expect a
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volatility and china to feed into your sales as we approach the chinese new year? it is a big percentage of your business. that event, that holiday, do you expect to see that volatility feed into the sales picture? seeing decent growth in china. we just announced greater china grew 4%. at double growth rates, but what i am encouraged by is how brent continues to do well. johnny walker blue label. we have these temples, the whiskey johnny walker houses in beijing. this is private consumption and that is doing well. i think that the chinese economy is clearly focused on growing domestic consumption so for consumer businesses as i look out, i expect us to see steady growth where we are reasonably confident going into the chinese new year that we will see good growth.
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i don't expect us to see spectacular growth but i feel good about the stability and underlying continued growth trajectory that we will see for our businesses in china. insight in thee january we are currently in. give be some guidance because people -- things have changed dramatically. 's you look at this month performance, have you seen a material impact on the business from what is happening globally? theithout commenting on specifics of this month what i will tell you for our sector is we are resilient. we don't see big swings in consumption patterns happening with volatility in financial markets or in oil price. the second thing i would say is one of the strengths is we have this geographic footprint that has very good diversity.
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so for the challenges in russia in oilzil and nigeria, dependent economies, those are offset by strength in columbia, in the rest of latin america. india is solid, southeast asia is solid. is wasiness actually true volatility with a lot more resilience. and i don't see anything dramatic changing by the patterns of january. in terms -- we have reiterated that we expect a stronger second half than first half of the company. jon: just a final question on the fx market, we talked about volatility in general. talk to me about the trends in foreign exchange at the moment. currentat your assumptions are. because i know that the strength of the dollar did impact the bottom line to some extent.
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>> we have a natural upset in our business mix. dollar earnings are over 40% which helps as the dollar strengthens. have a big emerging market business and the biggest factor we are facing is the volatility and the depreciating currencies in the emerging markets. it is hard to predict whether we will have another bout of depreciation in those currencies or not. we have this natural hedge. as the dollar gets a stronger, it is good for us. but places like russia, south africa and nigeria still have downside risk. the key for us as we are used to managing through this kind of volatility and with products like scotch whiskey which are imported, you just have to be judicious in how you take price increases, stay invested behind the brands.
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be sure you do not lose a consumer franchise as some of your products become a little less affordable when currencies depreciate. great to have you with us. thank you for joining bloomberg television. up next, we will be looking at why f x markets are telling the bank of japan's governor why he cannot turn back the clock. equities are marginally lower. the dax is up by 0.1%. the ftse 100 up 18 points this morning. good morning from europe and good afternoon in asia.
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jon: we are in positive territory here on the footsie. let's check in with nejra cehic. nejra: federal reserve change and it yellen and her colleagues have opened the door to a change in their outlook for the u.s. economy, and possibly a slower pace for interest rate hike. they are closely monitoring global and financial economic developments while assessing their implication for the labor market and inflation. morgan stanley says bond investors -- there are risks for the global economy. inflationampening pressures.
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fourth-quarter sales and profits beat estimates almost 1.6 billion users logged on every month. came fromof revenue mobile devices as facebook continues to sell more targeted ads across the sector. are currency traders writing off the bank of japan's governor from the weakening dapanese yen as kuro tries to meet his inflation target. caroline: we have already been analyzing what the federal reserve has been going -- doing. food for thought for kuroda. if you wanted the yen to go weaker, it has not been happening. we have just one bullish debt over 10 major currencies. it is going to go higher
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according to options traders. hedge funds are the same. they are saying for the first time since 2012, they see the japanese yen getting stronger. kuroda needs the yen to weaken. if he is going to be hitting his inflation target and stimulating his economy. he must -- it must happen. it must stimulate for the rest of the year if they are going to hit this inflation target. jon: you wonder whether the options trading are expressing a view on where it will go elsewhere. the combination between dollar-yen and global equities is so tight right now. if you want that natural hedge, you buy the call options. you wonder how much of that is about hedging. caroline: and how much more bonds they can actually buy. jpmorgan saying, they are running out of bonds to buy, how
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can you stimulate? jon: the bank of japan governor telling francine lacqua last week that 30% of the bond markets are not the limit. up next, more on facebook. ♪ 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. 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.
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jonathan: hello and welcome back to "on the move." joining the life from london, 30 minutes into the trading day, this is how the session is shaping up. territory, positive of 1/10 of 1%. the dax in frankfurt dead flat, up around three points. a big banking story we will get to very shortly. switch of the board -- what happened in shanghai overnight? the shanghai composite at the close down by 2.9%. that volatility continues. the previous wife days, guess the average -- the previous five days, guess the average change? approaching 6%. 1/3 of 1% this morning.
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$33 a barrel. choppy sessions in crude. non-decision,fed .84%. -- the fedhikes may have one view but the market has the opposite. let's get to caroline hyde. caroline: it's all about guidance this morning, really laying the pressure. i want to dig into two. this stock is having its worst day since 2015. a swedish telecom company -- why the fall? it's looking very weak for 2016. like 2016 is not looking rosy. h&m.o does
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once again it cut its forecast, as are the numbers we have for their fourth quarter. they dropped 8.4%. the dollar is eating into their numbers, it would seem, but also the fact that it was too warm. painful warm weather, bashing into retailers. but their guidance for the first quarter, say many analysts, are looking particularly week. -- weak. i want to focus it on anglo american. just for once they are in the green, and let's give credit where it is due. anglo american managed to post productions better than had been expected, rising some 23%. nickel,digging up more so overall it is a strong day for miners. jonathan: thank you. back to japan now. the japanese economy minister has claimed to have no recollection of accepting undeclared donations. that wasn't a press conference
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underway right now. the chief engineer of japan's distinct economic policy is alleged to have accepted ¥11 million in undeclared payments. let's get out to tokyo, wher our managing editor for japan is watching this developing story. this is such a strange story to anyone that is unfamiliar with it, so start from the top and break it down. then you will get to the response. >> ok. well, these are very serious allegations, carried in a very serious publication. this magazine is a respectable magazine, and the stories -- there were two of them, very long and very detailed. oese are the first two pages f an eight-page spread. these are not rumors -- this is a detailed report with all kinds of shady facts woven into the narrative. mr. amari started speaking at
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5:00 japan time, and last i minuteshe was on 29 almost without taking a breath. he is launching a very spirited defense, saying he has not taken any money in any personal capacity. he's acknowledging that there was some money he saw, and he considered it a political donation. he asked the secretary to treat it as such and he now insists that his secretary admitted to using ¥3 million and has already resigned. it looks like he is hoping to throw his secretary under the bus and stay in power. jonathan: as far as you are concerned -- and i don't want to get into speculation too much -- but he has caused embarrassment for what happened under his watch. heatedly apologized, but for thistors, economists, does
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have any kind of a consequence throughout the rest of the government and for abenomics, or is this a side story? >> i think it is a side story. mr. amari is very important -- we all know he led the tpp talks, which is an important issue. having said that, mr. abe's position is very strong. his support ratings over the were a tiny bit lower than a year ago, but certainly off lows we saw back in september after the security bills were passed. i think economic policy in japan will stay on track. abenomics will not be dented by this. for all we know, mr. amari may stand firm and retain his position, then will move on to the budget committee, which is supposed to start tomorrow. jonathan: moving on from this story, keeping on abenomics,
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more specifically about monetary policy, this is even a concern for them in any way at all -- are we expecting them to add to easing? where are we on the global volatility? are we concerned about their targets and goals? >> well, they are definitely concerned. you can never say no with mr. kuroda at the wheel. areif you look at what they saying -- both central bankers and politicians close to monetary and fiscal policy -- they're saying that most of the impact is coming from overseas. it's china having an impact on the economy, oil prices keeping from rising to the 2% inflation target that mr. kuroda laid out. the way to read that is they are saying it's not something that further easing in japan is necessarily going to solve. unless mr. kuroda decides to come out and do something very strange, like buying real
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estate, something he hasn't done until now, i don't think the impact would be lasting. you can expect the boj to stay on policy. jonathan: brian fowler joining us from tokyo, thank you very much. up next on this program, social climber. facebook shares a surge after hours as opposed to its latest results. we will break down the numbers, next. let's get a check on the markets for you. ,quities initially open lower up 1/10 of 1%. more on the markets after this short break. ♪
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jonathan: welcome back to "on the move." these are live pictures. the japanese economy minister says he will step down. some allegations from a japanese magazine that he and his secretary accepted at least ¥12 million in undeclared donations from a construction company. he talked about those allegations this morning, and attributed them to his secretary. he said it caused great embarrassment so he came out and said he will step down. he says the cash received is treated as a political donation.
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i believe we have brian fowler joining us from japan. he will join us shortly. but what you are seeing on your screen -- the japanese economy minister saying he will step down. more on that later on in this program. let's talk facebook -- shares rallying after the social media giant published another record quarter, an increase in users. caroline hyde is here to break down the numbers for us. another big quarter for facebook. caroline: a blockbuster. mark zuckerberg coming back to some sensational numbers, sales up 52%, reversing that slowdown we saw in previous quarters. add revenue could have been two thirds higher were it not for that. profit more than doubling, in excess of $1 billion. i think the notable thing is facebook makes the shift to mobile work. the more advertisements they get on the mobile, the more
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profitable. they get higher margins, unlike google and yahoo!. they have to charge more because they go one your newsfeed. -- 100 winning from that million hours of video being watched every single day. that's an interesting stat. it's making a comparable to youtube. i think also we are not just monetizing facebook and instagram, but what about whatsapp? what about the future of the likes of their messenger? this is where people are putting their hopes. and, notably, they are asking costs not as high as expected. generally, they are not exposed and they say the macroeconomic headwinds -- jonathan: the chair of tech city joins us now to talk about face book.
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great to have you with us. a couple years ago people would say, they will find it hard to monetize this platform, it will be difficult but they have done phenomenally well. of course they have -- and we never said that. [laughter] >> they have done an amazing job and they have really figured out how to capture their usage. more than half of users only use facebook from their mobile phones. that is amazing and unprecedented. jonathan: 80% came from mobile? fourth quarter, 69% -- that is phenomenal growth. where is the tipping point? >> i don't know. i think they will continue to push the envelope. they will show different and newer forms of engagement. they talked about expanding moments, which just launched. they talk about doing things which other people are saying moret make them look - like twitter. they are now able to expand into other types of mediums.
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caroline: interesting that they just post from twitter the head of product, to go and help instagram. but in terms of where facebook is going -- we have all talked about how we like these numbers, but they will have more than just that. there will be reactions, and suddenly we will be able to engage differently. that's right. and we shouldn't trivialize what you said earlier, that they will move everyone onto messenger and what that. you will learn the difference between the timeline and what you do with your friends -- it's not so different anymore. they will capture more users that way. jonathan: a good discussion yesterday about messenger -- you just wonder, we talked about the facebook platform and how to monetize that. people are having the same discussion about the messenger and whatsapp. >> how quickly can they monetize that? >>i think --
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>> i think they are doing the right thing by going to a free model. they want people to be locked in using their platforms and products in order to stay in touch with everybody -- friends, family, business colleagues. then they will start to monetize. jonathan: quickly, a minnow in this sector called twitter, its $11.4 billion, nothing compared to facebook. and questions we used to raise about facebook we are still raising about twitter. can they ever compete in the same way? caroline: the problem is who uses twitter -- at the moment it is a talking shop between celebrities and journalists and not too many others. what twitter needs to do is understand how they can push up to $1 billion. less than any facebook current product. they need to somehow engage in rewind on twitter, and that is
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the big challenge. they are changing up their management. they've got jack dorsey trying to figure out how you start to make this. they're trying with what they have, and once they capture the video streaming, perhaps we will become that much more addicted. jonathan: they would be terrible to have eileen burbridge on and not talk about the u.k. tax. 30 companies entering, talking about the program. >> it's incredibly exciting. i appreciate the time talk about it. we are launching at this morning. at companiesused poised for rough roads. this is good for the digital sector, and also for britain overall. these are companies that will really drive productivity and contribute to the economy. dhese 30 companies either raise financing and valuidated or
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have achieved revenues to think wyou are on the cusp of bringing making it big. and let's get you some great advice and suggestions and get you on your way. jonathan: these companies -- is the rule of money still there? is the mentoring there for more -- where are we in that cycle? >> it is both. do think not every pound is the same as every other pound, and what helps is the knowledge that comes to their. daycially in this critical -- jonathan: thank you very much. the chair of tech city, and bloomberg caroline hyde. up next, the south african reserve bank makes a call on rates today. economists expect a hike, but
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not a significant one. we go to johannesburg, next. ♪
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jonathan: welcome back to "on the move." my pictures of tokyo, the economy minister of japan, has said he is resigning. a week offending of allegations of financial impropriety, and he decides to step down. that news is breaking in the last 10, 15 minutes
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. akira amari, the key engineer of the abenomics program, stepping down. big news in japan -- what's coming up throughout the day. first up, u.k. gdp. then eurozone consumer confidence. this afternoon, german inflation data and u.s. goods at 1:30. south africa, makes a call on rates today. economists expect a hike. i spoke to the south african reserve bank governor in davos about his currency concerns. bubblingason it is around 6% or outside of that -- we expect that external inflation will be outside of targets. a combination of those two effects could lead to a new coming of inflation and they
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would act with result. that is why we started to take those. jonathan: let's get to johannesburg to look ahead to the right decision. another boss that there -- great to have you with us. a question this morning -- the size of that rate hike. where is the market position and where other calls? >> yes. definitely. the market is expecting a rate hike this afternoon -- what we are seeing is that they priced in a 60% chance of a basis point hike. well over 100% probability for a 25 basis point hike. that's being driven by the fact that they have been reaching record lows. 18 to the dollar earlier this month, and the markets are definitely expecting that the
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reserve bank may have to take a more aggressive stance in monetary tightening. jonathan: thank you very much for joining us this morning. let's bring in richard jones from first word. richard, for any central bank governor, the ultimate dilemma is an upside risks to inflation and a downside risk to growth. that is the kind of risk central bank governors have to manage. it's incredibly difficult to do, isn't it? >> it is. i was looking at the south african numbers -- the unemployment rate is there 25%. that's very difficult to balance, obviously inflation from a weaker currency, and we all know why emerging markets are suffering. there are positives to that but at the same time, runaway inflation is a difficult balance to draw. jonathan: at south africa right now is at 3.5% inflation, expected to drop out of that as the reserve bank at 6%. what interests me is that we talk about the domestic issues, and the fed has become a back story, which is a story in itself. the federal reserve yesterday --
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is the door still slightly ajar for a march hike? >> at the risk of sounding glib and dismissive, i think the fed basically knowledged the conclusion that investors have come to a few weeks ago. there are some international headwinds. i think march, if you look at market pricing, is very much off the table, this by what you read from some economists and fed speakers. the market is up 20% for a rate hike in march, and i'd be very surprised if they moved. jonathan: in terms of the market, i wonder what it means. tighter fed,less so to speak, would be good for markets. but it seems the pessimism about the global economy -- is that where we are in a discussion at the moment? >> i think that balance is very much where we are. you look at why isn't the fed
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hiking and that is the question a lot of investors are asking. only last month they had an upbeat view of the american economy, and if that has changed, what does that mean for asset prices? i think there is nervousness. jonathan: richard jones, you have the fed pulling back, the ecb stepping up. you wonder where we are in that euro-dollar traded, stubbornly between 108 and 109. where do we get the break -- upside or downside? >> i think we have widening speaking tonight and i think that might give us a little bit of direction as to what will happen. so much is baked into that price right now that the ecb will probably have to surprise to the more dovish side in order to shake that out. one final question --
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in 35 minutes we get u.k. gdp. is it set to validate the current stance? to hold, to sit there, do nothing for the rest of 2016? >> yeah. year onctation for the year reading for that gdp number is 1.9%, which is ok, but it's not great. it certainly doesn't point to an economy that is accelerating to the upside. i think it probably does validate it, and you start to look toward next month for the qi. jonathan: richard jones of bloomberg first word, good to have you. we wrap up the first hour of trading with 56. dax deadle higher, flat. stay with bloomberg tv. "the pulse" is up next. we have an interview with the deutsche bank cfo coming up et al. :00 p.m. u.k. time. guy johnson will be speaking to him. in the meantime, talk markets with guy or myself on twitter.
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the ftse in london up 11 points. ♪ the only way to get better is to challenge yourself,
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francine: the fed statement fuels concerns about weakening global economy. slide.hares ofll speak to the cfo deutsche bank later today. japan's economy ministers sit down amidst a financial scandal. so, welcome to "the pulse" l ive in london. i'm francine lacqua. let's get straight to first work news.

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