tv On the Move Bloomberg April 8, 2016 2:30am-4:01am EDT
guy: welcome to "on the move." we are counting it down to the european open this friday. i'm guy johnson alongside hans nichols in germany. intervention watch. the japanese getting ready to step in if the yen sees a surged 105. the fed four. yellen, bernanke, greenspan, and boca head to the stage in an historic conversation. certainly wouldn't describe this as a bubble economy. we have relatively weak global
growth, but the u.s. economy is doing well. admitsd david cameron that he and his wife own shares in a panamanian trust set up by his father. how hard will the revelation hit? good morning, hans. a couple stories dominating. the first is what's happening in the financial markets. a move in the opposite direction, but nevertheless, everybody is on hooks waiting to see what the japanese will do. then you have this story with david cameron. when you and i caught up this morning, i was surprised at how dominant it was in the german press. hans: you know, when i was in the public broadcasters this morning, they all lead with the david cameron story, the idea that he wasn't upfront. dominating coverage here as well. in some ways it is the extent to which germany is concerned about a brexit. a great deal of concern about whether the u.k. will leave the eu. germany doesn't want that. guy: yeah. all things seem to revert back
to brexit. fascinating to see how it draws back into that story. less than half in our way from the open; let's update everyone on where we see the open. looks like we will open on the front flip. wei function, if want to play along at home, click the futures box and you get this line. what that shows he was the european equities this morning. they will open on the front foot. hans: yeah. a lot of it is related. let's go up to that 109 level, bouncing slightly around their. -- there. topix not doing well on the back of that weaker yen, and brent north of 40. i want to look a quick look at gold. it's only down about $3. let's get the first word with camus the romanoff and -- with camukumutha.
kumutha: the u.s. economy is on a solid course and not in a bubble. the fed chair was joined by her three predecessors at a panel discussion in new york. she said inflation and deployment remain the key indicators dictating the pace of future rate rises. >> we don't have a goal for the dollar. what we are looking at is the economy as a whole, and are andly paths for inflation employment to which you saw goals. kumutha: david cameron has revealed that he did have a stake in an offshore fund set up by his late father until six years ago. that is the first time the british prime minister has answered the question of whether he ever benefited from the investment. he spoke to itv news. >> samantha and i had a joint anount, and we had
investment trust, which we sold in january, 2010. that was worth something like 30,000 pounds. i paid income tax on the dividend, but there was a profit on it that was less than a capital gains tax allowance. i didn't pay capital gains tax, but it was subject to all the u.k. taxes. kumutha: is business as usual for the icelandic bank? political turmoil the country is experiencing, the central bank governor tells us in an exclusive interview, that plans to reduce capital control will go ahead despite the changes brought about by the panama papers revelation. aboutare never concerned the politics or political process for reducing government. governmenth whatever independence in
terms of monetary policy with respect to government. kumutha: global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories at top . guy: thank you. let's talk about the yen. if the japanese currency had been the big winner, japanese thtral bank is the loser as e yen surges. it's bracing to jump past 105. then it b comes at what point does the boj intervene. those are the questions kicking around the market. let's get our guest in on this, the chief strategist for morgan stanley. good morning. >> it's a big story. it's a market where you have a lot of crosscurrents between the pmi and other data picking up,
but at the same time, indicators of risk like the yen and commodity prices have been headed down. i think those are hitting critical levels for the yen, where you are reaching levels where the market will expect some greater form of either central-bank action or policy action or both. guy: which do you think is more likely? >> we think it will be a mix of the two. we will get increased central bank action at the policy meeting, an increase in etf purchases, but importantly, and the spoke to your previous guest, we will see fiscal policy step up in may. i think that will be an important element to complement anything the boj might do in april. hans: andrew, i want to take you off again story, although i agree it is dominating, and take you back to europe, where it seems like helicopter money was rolled out. was helicopter money something guy and i like to talk about it,
or do you think that the ecb has rolled it out as something more serious? >> no, i think it is something we never seriously considered to be on the table. look, if we think about ecb action, i think the ecb needs to get credit for legitimately surprising to the upside; not just surprising, but doing so in a way that wasn't targeting the currency channel. in some ways, the way we look at this is the ecb did what was in the greater good. the world in january and february was stuck in an environment where they were concerned about competitive devaluation of currencies, and what the ecb stepped up and did was taking clear action, not based on weakening the euro but directly intervening in the credit channel. when you look at what is happening -- central-bank versus central bank -- yellen becoming more dovish, the boj stepping up -- give us a competitive picture.
who has got the nose ahead in terms of convincing the markets that they are the ones you should pay attention to? >> i think it's a difficult backdrop. and stillen in, might be in a place, where it appears like there is cooperation between central banks, not to weaken currencies against each other. but in our view, it is more coincidence and cooperation. guy: shanghai didn't produce any formal, behind-the-scenes agreement. >> not in our view. as we move forward into the summer, i think the risks increase. it's tested. the ecb will raise policy rates further. we expect additional policy action out of japan. some of that might start to fray the optimism that there was some sort of g-20 agreement. guy: andrew, stay with us. up next, we are going to talk about constitutional violations. apparently not enough to oust jacob zuma, as members of his
guyhans: welcome back to "on the move." a beautiful morning in berlin. let's get to the first word news. kumutha: thank you. shares and fast retailing have plunged, falling the most since 2013 after a second cut to full-year forecasts. the boehner slowed its operating profit forecast by 1/3. the company says it was hurt by the strong yen and an unexpectedly warm winter. the fbi says it paid for the tools used to break into an iphone last month, and is considering whether to tell apple how it was done. u.s. authorities dropped the suit against the tech giant after help from a third party to access data on the iphone 5c.
the fbi has said it is not providing a hacking tool, and considering whether to provide the solution to local law enforcement agencies. verizon plans to make a first-round bid for yahoo!'s web business next week, and is willing to inquire it to sweetened the deal, according to people familiar with the matter. meanwhile, a separate persons as google is also considering bidding for yahoo!'s core business. goldman sachs has promoted a new head of its u.s. interest rate business amid turnover. 2012, named a partner in and will leave the u.s. interest-rate products trading group, according to a memo obtained by bloomberg news. that your bloomberg business flash. guy: thank you. getting a bit of news out of socgen. a review seems to be
resulting in a refund for the bank, plus a bit of interest, and the bank is saying it will affect its q1 results. subbing to pay attention to at the open. the crisis surrounding jacob zuma worsens as a group of 40 prominent members call for an emergency meeting to discuss the leadership. nation's highest court rules the embattled president violated the constitution, using taxpayer money on his own home. let's get the latest from a bloomberg reporter. how significant is this latest twist? >> good morning. it's pretty significant. it's the first time we have seen high profile members and descendents coming out strongly, saying we want to hold the president accountable, we want to hold him accountable, we want to meeting and we wanted urgently. we saw the rand racking up
losses, and it seems the markets are watching it closely. hans: if i could follow up on that rand point -- that is one of the strongest currencies out there this morning. you get a sense that markets want to see some sort of resolution, and this latest revelation gives the sense that we could be at the end of this story and we could have some settlement. >> will definitely. -- well definitely. the markets are watching this very closely. rating agencies have pointed out that the political risk that has come out of south africa ever sends the former finance minister was fired quite abruptly is something that they will keep an eye on. what we are seeing on coming out against him is something really unprecedented so it is definitely a strong move against definitelyuma and
good to have him step down. guy: we will leave it there. thank you. we will continue to monitor this story. let's talk about em now, and its relationship to the developed markets. i just want to show you this chart. the volatility story. this is an fx story. what you have is the developed market now north of where we see it in the emerging markets. that's a fairly recent phenomenon. you can see the spike through. this is the white line of g7. the world is awash with volatility. em, obviously, you would expect it, but nevertheless, we are seeing quite a lot. you have what's happening in south africa, in turkey, in brazil. is it still too early to get
involved, despite the fact that the developed markets have volatility looking benign? >> we think it is too early to get involved. on the em equity side, our em strategist has been clear. we think this is a bear market rally, not the start of a new bull market. we think we still see very weak fundamental trends. if you adjust for the composition of the indices, it does not look cheap. we still believe we are in a structural, secular dollar bull market that will weigh on e.m.. if we look at the current environment, we think low levels of volatility are an opportunity to buy volatility, not an indication that this is a safe market. guy: you get a lot of pickup on bonds. if you look at brazil,. you are getting a really decent turn. you are getting a lot of volatility, but nevertheless, look at pickup. >> that's a fair point.
the fixed income side has done well, and i think something that are fixed income strategists have been eager to point out is that all the select opportunities, for example in brazil, remain relatively high and attractive. but even then, if you look at the return of an em hard currency bond, you are up close to 3% in five months. that is a sign of what we would expect for the entire year. i think it is an area where one needs to look with a little bit more skepticism. in the light of the strong performance we have had. hans: you take your gains, you book them, and for the rest of the year, where do you chase yield? for do just accept a low return environment? >> i think that is a major challenge. it's obvious that there is not a lot of other yield out there. i think we would be running, or
are running, above average cash balances. i think that makes sense given how much equity markets have come back and how well fixed income has done. i think we are seeing better value and corporate credit, and better value in parts of securitized credit. i think those are areas where we look to continue to clip coupons over the course of the year in the context of a relatively new environment. guy: andrew, stay with us. thank you for being here. minutes away from the european equity market open. up next, how the open will progress. ultimate battle of the charts. hans nichols versus guy johnson -- you will be the winner? andrew sheets will decide. 10 minutes until the open. ♪
in berlin. if no one has told you, this is when we throw two charts out there and you get to adjudicate. my chart is about oil. we spent a lot of time talking about the yen, but my goal is not to win the week -- it's to elucidate and clarify for the viewer, hopefully for andrew. what we have is u.s. oil production. we see it taking here, 9.6 million barrels per day. it goes all the way down, right now heading in a clear direction. output has dropped, down close to that $ 9 million barrels per day. the blue line is the price of wti -- sorry, what oil has traded at. it gives you a sense that the u.s. oil producers in the plant regions, where you have some of the shale drilling, are feeling the pain. production is down, over half a
million barrels off the market. we will see its filter through into this oil story; it could lead to a slight rally in the price. but guy, my interest is not winning, isn't having a good chart that explains things. guy: it's all about taking part, isn't it? i've heard that somewhere before. anyway, this is my chart. this i comes from the bank of nw york mellon. if i lose, he will take the blame. boj intervention. it's a subject that everyone is talking about. simon points out that there is a key phrase, one-sided. if you hear finance minister use the word one-sided, it could be a clue as to intervention coming. this is 2010, 2011. andsed the phrase shortly afterwards we get intervention twice. this morning, we have seen a selloff in the yen because the
current finance minister has started using similar language. this morning he used the phrase "one-sided." are we about to get into intervention? is the language critical to what is happening here? andrew, we had it to you. >> look, i think you are both winners. guy: it is going to be a draw. >> both are very important. the market is following the yen and following oil, and they are probably the two most important factors in the market. hans, to your chart on oil, i think it is important to a knowledge not just the production going down, but it has also been a drag on u.s. growth. it has been a huge drag on structured investment. if we think about the gdp numbers you can't ignore the fact that it is being driven close to outright recessions. our forecast -- hans: there are a bunch of mini recessions taking place.
guy: good morning, you are watching "on the move." i am alongside hans nichols. he is in berlin. we are moments away from the start of european trading. hans: we are watching the intervention watch. are the japanese getting ready to step in as the top forecaster sees a surge to 1.05. and ben bernanke and greenspan take the stage in an historic conversation. a i would describe this as bubble economy. we have relatively slow growth but the u.s. economy has been doing well. hans: david cameron admits that
he and his wife own shares in a panamanian trust set up by his father. how hard will those revelations hit the british prime minister? we will be up about 0.5%. caroline hyde is at the touchscreen for the open. caroline: three seconds into the opening of the market and we are down 1.5% on the week on the stock 600. it has been a bit of a risk aversion theme this week. imf coming out seeming to say they will downgrade global growth prospects. but it really is going to be the miners taking a leap. you will see oil company's doing relatively well. on the downside, some of the financial institutions, gold selling off today. we open higher on the cac 40 as well. green on your screens as we exit
this particular week. japanese yen has really been driving things over in asia. you saw japanese stocks lift off, dragging the asian pacific with it. this is the dollar higher, the yen going weaker. 108 seems to be what both bulls and bears thought intervention would come. oil,et's have a look at that has been driving stocks higher up. contracts, $39.98 at the moment. it is been up 3.5% this week. you will also see gold coming down. let's check in on some of the stocks on the move. i want to check in on air france, we have numbers coming from them that were not all that fantastic. within the rally, we see passengers up 7.6% to 7.2 million.
unit low cost transasia units jumped 21% in terms of passengers. even though we see spanish cup edition regulators opening -- competition regulators opening a probe to investigate potential collusion, some concerns about mortgage fraud but they are- getting money back from the european commission. euros worth. this will affect their first-quarter numbers. guy: you don't get good news from the banks very often, so we need to highlight it when it happens. this is the picture, energy well big this morning, financial sectors, the second-biggest material gain. we are definitely in a risk on
mode this morning judging by the sector story. some of the cyclicals getting a better bid as well. the energy stocks, ne 1.4%.1.6%, shell up by guest is still with us here. below the index level, tell me where i need to be positioned. guest: i think it is a challenge that if you look at the market, many of the sectors that are -- we are exposed to a commodity story where we do not see -- guy: it is quite a rally back. guest: they have already moved a lot and we do not see a lot of movement here in base metals. what we like in the u.s. is health care at the moment. we think that is a sector that has underperformed, your today.
it come -- year to date. certain aspects like consumer quality with staples. guy: if we see this rally carrying on, we have a meeting coming up with doha are that push -- doha which could oil higher. are we too early with the help here trade? the market -- with the health care trade? the market continues to trade out of it. guest: it is certainly a risk. forhink oil will be a range the next six months. we see it struggling to break much above $45 a barrel. we think the downside is limited by the potential for opec a ction, or whispers of action. you have oil in a range, using energy move a lot relative to the oil price, we think the
risk-reward in the energy sector is not that great. we would rather be and other cyclicals or health care. hans: you stay out of the energy sector, at least the oil shale story, what does that mean when you look at the overall dollar play? earlier, we talked about the dollar where you are bullish on the dollar, do you see some strength coming back because the market is convinced that everyone in the ecb is more dovish than janet yellen? guest: we do think that the dollar on a six or 12 month use will strengthen again. if i think about our morgan stanley fx forecast, the number one currency was the yen, our second favorite currency was the dollar. the yen has already moved a lot. we have to become more cautious as it approaches our year end target. if we think of at the dollar, it is still supported by -- about
the dollar, it is still supported by differentials. the dollar could strengthen, which puts more pressure on the fed, or additional easing from the ecb or the boj, which helps us from the other election. we seek -- other direction. we see this as a tactical dollar pullback. guy: let's talk about the dollar story in a different dynamic. we saw these four fed chairs on stage, an historic event. producers produced this chart, crushing inflation out of the u.s. system in the early 1980's. greenspan, bernanke, yellen. the white line is what the u.s. rate story has done, and the yellow line is the 10 year. it ise away from this is, almost irrelevant. everybody else did the work. this inflationary push lower has
been continuing ever since. i want stability in a world full of volatility, buy the 10-year. guest: the u.s. market space is significantly more attractive than bonds in europe. you could have a situation where, if the world gets worse, the differential narrwos t -- narrows tighers. . did the hard work here. the other thing that jumps out for me is how important international factors also matter. when you had the interest rate hikes in two dozen for, we were -- in 2004, we remember that surprise in the market that the 10 year did not go up more. you see some of those same
dynamics at the moment and terms of, why when the fed started hiking have rates not gone up? it is what you mentioned. what's going in europe, japan, and the world. hans: i have a question, that may keep merck king up at night, it looks like they were able to break inflation. who is able to reverse it? is that even metaphysically possible? guest: i think it is. there is a lot of noise in the inflation data at the moment, given you have had some of the biggest year-over-year moves in oil in history at some of the biggest currency moves. both of those reflected the headline data. in thelook at core pce u.s., it has been reasonably stable and taking higher. even if you look at core measures of inflation in the eurozone or japan, it's not great, but heading up, not down. some banks are dealing with an inflation problem, that our view
it is more likely you will see in deflationary pressure than deflationary pressure -- you will see inflationary pressure, rather than deflationary pressure. guy: the headlines are dominated by deflation. we talk about the dis-inflationary story that kuroda is trying to fight against. blackrock and other houses saying, get ready for this. you are saying a similar tune. is the market set up for the reemergence of inflation? guest: i think it could be. a world that contains more inflation, that runs higher than central-bank targets is much preferable. guy: agreed. but current set up, market pricing, correct for the environment? guest: if we look at yields in europe, where real yields are in japan, even nominal yields in
the u.s., it is not very well set for a rise in inflation. if you look at break evens, it is still very low. especially if you adjust for the fact that those are based on cpi,. which should rise higher there is -- cpi, which should rise higher. there is more to come from retirement. guy: up next, find out what london mayoral candidate thinks about the eu referendum. what would a brexit mean for the city of london? we discuss it, next. ♪
guy: welcome back, you are watching "on the move." we are up by about 0.5%. it has been a disappointing week, but at least we end on a high note. let's catch up with the world news now. here is the first word news. kumutha: david cameron has revealed he did have a stake in an offshore fund set up by his late father ian. it is the first time the british prime minister has answer the question of whether he ever benefited from the investment. he spoke to itv news. cameron: samantha and i have
a joint account, we on 5000 units which we sold in january 2010. that was worth summing like 30,000 pounds. i paid income tax -- something like 30,000 pounds. i paid income tax, there was profit on it, but it was less than the capital gains tax. trillion per$5.3 day foreign-exchange market has had a rocky week. volatility has risen for the highest its 2011, that as the yen surged toward a 17-month high before the dollar retreated to its biggest intraday drop since march 10. japan's currency has climbed against all of its major peers amid a tumble in commodity prices that sparked a debate about how close local officials are to selling yen to help gains. on the find more stories
bloomberg at top . guy: thank you, kumutha. candidate has pledged to be the most pro-business mayor that london has ever had. he also said that it is crucial that britain remains in the eu. have 500 million potential customers, walking away from a market that has led to so many jobs in london, the expansion of so many businesses is ludicrous. and the idea that we could elect leave the lead -- to european union -- back into theng conversation the chief asset strategist for morgan stanley. who is the idea, people operate in the financial
arguments are generally of the view that at some point rationality will take back in. you step outside the square mile and that view becomes more dispersed. thehere a danger that financial community is underestimating what is happening? guest: i think there is a major injure. -- danger. when they look at the u.k. they say, they would never do such a thing come a it would not make sense. that misses the fact that this is very divisive. there is also the potential of what i would call an intensity g ap, where those who want to leave care more than those who want to stay, who see the benefit as more broad-based, generic, and hard to pin down. closenk it will be a vote, all the way to the referendum date, and something that will continue to weigh on
sterling. hans: what do you tell your clients? steady as she goes? nobody wants to make a prediction because it is unpredictable. in washington, every embassy before an election have two memo s written, the memo if the republicans or the democrats win, then they send the one that turns out to be right. banks don't have that luxury. how do they position client portfolios? guest: we want to look at several things. it's one reason why we have been and remain bearish on the british pound, it has been moved a lot, it prices and more brexit risk than before, but what you're looking at is still the risk of further downside as the vote stays close. guy: we are at 140 now. you can see here the big move that we saw. this is a skew trade.
we are at 140 now, what does more mean to you? guest: you have the risk where if you have a leave vote, the pound is likely to overshoot -- guy: running into the vote? guest: we see continued downside 1.30's, and ahe leave vote could transition to the 1.20's. investorse advising -- we think this remains a broader headwind to the european equity story, relative to the global market. it is not just about the u.k., this is about the broader european union, how it can deal with conflict. we think that will weigh on equity sentiment relative to the u.s.. is: what's interesting,
that it is their biggest you wish and gap since 2005. you take the sterling trade and say, u.k. equities may be a safer place to sit, that can be an asset. if i need to hold u.k. assets, that is the place to be? guest: it could be. it is a challenging factor because the u.k. index has been so skewed by energy exposure. we are also mindful of the pattern around the scottish referendum. the equity market is very relaxed going into that event. everyone says that it is a currency issue, not an equity market issue, until two weeks before when it became an equity market issue. they can stay the correlated for some time -- de-correlated for some time, but as we get closer it will be hard to ignore the currency markets and what they are saying. khan -- sadiq k
will be filling up shortly. take us through volatility. it is nearing a key level. nejra: the chart i am showing here is to do with dollar-yean and options on this. we have seen it breach 108 this week. you can see the dollar-yen is that yellowish line. at the same time, options traders have been increasing their protection against further yen gains. the white line is the three-month risk reversal option. they reached negative 2.1 percentage points last year. a negative level means that trading a bigger level to sell dollars, protecting themselves against the further yen gain. it's rocking back to negative two tod -- negative two today. that level at minus two is still near a 2010 high.
guy: we are getting kind of extreme in the positioning. we have seen the pound move quite aggressively, extreme positioning. we are seeing similar trade in the yen. are we near an inflection point? guest: while this is a key chart, we have talked about central intervention and what the bank can do to weaken the currency, there is the risk the bank could continue to strengthen because of investment by japanese investors which is still unhedged, which is why they have been bullish on the yen for this year. so those japanese investors in towel,nse throw in the start to hedge those positions, and that is one of the risks that makes this a relatively two-sided story. guy: think you can get sub 100? guest: our forecast has it by
year end. it would certainly be possible. this is the challenge with the yen which makes it so hard, it is still very cheap. after the move, it is still one of the cheapest currencies. if you think about, where does it need to stop on valuation grounds, it is hard to draw a line. it comes back to intervention which is a challenging feat. hans: earlier, you said you thought there was still gas left in the tank for the ecb to try to do more for quantitative easing, try to do something with the euro. where do you see that coming from? it is pretty clear that draghi is saying, we will wait to see where the effects are, they will buy a lot of state debt, when do they run out of road? guest: they are in a challenging place. we think they will cut the deposit rate further by the middle of this year. if we look at how the markets
react, the market has so far not taken further cuts and further negative rates as a positive thing. given that they have already embarked on this unprecedented step of corporate bond buying, it is hard to see the making another major adjustment in the near term. it is easier to look at the bank of japan and think that there might be up ticks in eps purchases, but for the ecb, i agree, it will be hard for them to do further accommodation that the market will like. guy: thank you very much indeed. circling backup to the central banks. hollande'sesident energy secretary will be speaking exclusively on why donald trump's pledge to tear up the nuclear deal is on why --
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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. guy: welcome back, you are watching "on the move," 30 minutes into the trading day. let's see how things are shaping up. european equities are getting a little longer. a similar story a cross the area. oil stocks are also trading higher. which other stocks are on the move? caroline: i want to call your attention to this today. your best performer on the stock 600.- stoxx why isn't doing so well? it is at a tipping point. what is fueling the rise and the optimism? you can -- it is all about an
online unit overall. that is really driving growth. unicredit also driving up higher. why? maybe the threat that consolidation is using a little bit for the italian big players. maybe they won't have to scoop up some of the lowest performing private lenders. the italian financial institutions are intensively working on a solution that would see private investors participate in a fund aimed at supporting the recapitalization of troubled lenders. unicredit might have to be one of those that has to buy up other companies if they are doomed to fail. it seems that the popolar vicenza ipo is on the move as well.
there is hope for local lenders. a human oil services company. why is it falling on the day when oil is on the rise? the reason seems to be, a w arning for the first quarter. at one point as 4% because it will miss its estimates. net revenue at $64 million. the last quarter they mentioned was arguably the most severe in this down cycle. a hint of optimism, but it seems to be a warning coming out, tracking that stock lower. hans: donald trump's promise to terror up the iran nuclear deal presidentiale election would be unwise according to barack obama's middle east secretary. what did the undersecretary actually say? >> i guess he was being a bit done lack -- diplomatic, saying it would not be a great i get
the come back in and go back on these tough negotiations that were had with their partners in the pf plus one. we talked in more detail about iran having had sanchez lifted and coming back into the oil market. we know that -- sanctions lifted and coming back to the oil market. we know they are already pumping out millions per day. there is something that the international energy agency says it is unlikely to happen until the end of the next decade. >> they started out with a fair amount of reserves that they are marketing. the bottom line is, i have always understood the capital requirements to be in the order of $150 billion, to invest in those fields, to bring them back to the production rate they are talking about. i don't see how those resources will be attracted on a short
timescale. i think that they will build up over time. how fast it goes, i cannot say. we know that the capital requirements are significant. we could not avoid the subject of oil prices and ont upcoming meeting in doha the 17th of april. guy: what is his view on that? ti idea thatuwai we start to see a shift, what is his view? does a deal get done? if so is it more important for sentiment than actual output? compared with, the u.s. and the iran getting on the same page with nuclear talks, how tough would it be for saudi arabia and iran to get on the same page when it comes to these negotiation's in -- negotiations in doha.
there is no guarantee that the iranian oil minister will be there. you have to ask yourself, is iran going to feel that it is in its own best interest to agree to a freeze of oil output, whether at january or february levels, when it still feels that it wants to get the market share back then it lost when under sanctions. would do saudi arabia a favor. it is hard to see them doing that. guy: great interview, elliott gotkine joining us on the energy story. oil is poised for a weekly gain. u.s. crude continuing to drop. we have just been discussing what will happen in doha. that is a week, monday. trade how is oil going to through this next week? we are a week away from this meeting. >> i think that oil will trade
based on the rhetoric we hear from saudi arabia and iran over the next week. the doha agreement i don't think will have any effect on the physical supply of oil, but an agreement versus a non-agreement will have a big psychological impact on the oil market. guy: if i can get you on that site -- hans: if i can get you on that psychological question, we talk about the theoretical level at which shale producers can stay profitable, there was a number overnight at $30 per barrel, where is there breakeven point -- where is their breakeven point? >> i think there are a range of rake even points. economic ship -- break even points. economic -- a $600 per dayat decline and shale oil production. for the u.s. to get back to a flat level on shale production
will need north of $60. guy: so that is the cap? that is effectively where we can run to, so give us the psychology of how the market will perceive this. we know where the cap is, and where the floor is, how do we position ourselves between those ranges? are we dealing with a wedge? do they come toward each other? >> i think that we are. as a matter of fact, i think the situation we have in the oil market now is unsustainable. we are trading in the near tearm because the market is oversupplied. i think that we have a high probability of seeing higher oil prices on a sustainable basis as we move into the fourth quarter of this year. -- be a cap?cap i tend to think that it won't. i think you could get through
$60, that probably takes another year to year and a half. guy: in terms of this argument aret the notion of where we -- is there a tipping point that comes shortly if that's the case? where do you said that moment happening with the market starts to realize we are in a new narrative? >> i think that we need to start drawing out of inventory before you can start to shift into a flatter -- they have already flattened quite a big, but the flip you need to start taking oil out of storage. q2.ill happen in q2 -- in it could slide into the first quarter, but it is less than a year away. hans: we just heard from the u.s. energy secretary saying oil coming out of iran that fast has
to do with them draining the reserves. do we have a good sense of how deep their reserves are and what their costs are in bringing that oil to the well? >> a lot of good questions. initially we were looking at irani and storage being drawn down significantly. we think they had 20 million barrels of storage at the time the sanctions were lifted. in terms of what they can produce, i don't think they will be able to do much more than 3.4 million barrels per day. maybe another 300 per day compared to what they are currently doing. in terms of reserves, i think iran can probably get to 5 million barrels per day over a period of time that has steady investment. that is probably getting into the middle of the next decade. guy: the end of 2017 is a forehand. you say, 3.1 now. we get to 3.4 reasonably easily.
when you look at the propensity for a deal to be achievable, given the february numbers are at 3.1, the possibility of a deal must increase as we make that shift. >> i think that is exactly right. to ability of the iranians get the 4 million barrels per day is a low probability outcome. i don't pick you get enough investment into the country to achieve that. if they get to 3.4, they are probably relatively comfortable agreeing to a freeze because that is all they can do. guy: jason, great to get your thoughts. up next, online bidders. we will take a look at the tech and communication giants lining up for possible bids. that story, next. ♪
guy: welcome back, you are watching "on the move." you'll see a mixed bag this weekend, looks ok at the moment. up about 0.6% on the ftse. up around 0.5% this morning. let me show you what else is happening as well. imap showing that the energy sector is doing relatively well. this is the first thing you should do when you get in in the morning and log on to bloomberg.
how important is that move? you can do this. that is what i wanted to highlight here. you have a japanese yen moving down by 7/10 of 1%. minister is out, effectively talking again. let's get to the bloomberg first word news with camus the -- kumutha. kumutha: shares falling the most since 2013. they lower their operating profit forecast by one third. the company says it was hurt by the strong yen and unexpected warm winter. has started the process of choosing investment banks to link its indian wireless business. the listing could be a long the biggest initial public offering. u.k.-based mobile phone operator may sell about 10% of its india units through the sale which could value vodafone india at about $20 billion.
the fbi says that it paid for the tools used to break into an iphone last month and is considering whether to tell apple how it was done. u.s. authorities drop the suit against the tech giant after a third party helped access data. the fbi has not said who provided the tool and is also considering whether to provide the solution to local law enforcement agencies. goldman sachs has promoted scott roafie too -- scott head of -- he will lead the interest rate production product trading group according to a memo obtained by bloomberg news. your -- that is your bloomberg business flash. are: verizon and google among the communications at the tech giants whiting up offers to buy yahoo!'s -- weighing up
offers to buy yahoo!'s tech business. caroline hyde has been looking at the players. it looks like marissa mayer could be out of a job. is that accurate? caroline: it seems that if verizon was the winner, they have already lined up who would be the new chief executive and it would be held by two people. the ceo of aol that verizon already controls as well as verizon's executive vp. farewell marissa mayer. unexpected within this bidding process, but it could be a significant deal. yahoo! is just the overall search engine business of it all. lessuld be worth slightly than $8 billion, but verizon is also willing to send up another a $.5 billion for yahoo! japan. we know that yahoo! would like to sell both together. that is a hefty price tag. it is an interesting rough ride
for yahoo! in the press because as they start to court potential suitors, they show their financial potential. when you lift up the lid, it is not looking all that pretty. revenue could fall 15%. profit could fall 20% this year. what are the activist investor who pushed this entire seachange is still saying, i want the board replaced. i do not actually trust them to weigh the options rationally at the moment because verizon is not the only player. guy: if it is not verizon, who could it be? caroline: it could be google's parent company. alphabet lining up yahoo!. there are also private equity companies out there. there are others who could buy inin its entirety, or get bed with other particular syndicates. perhaps they could back a
potential bid by horizon. timing is still evaluating a bid, but who is out? microsoft. they might potentially put in a small token gesture but microsoft will be out. they've also decided against bidding for yahoo!. another interesting player to keep an eye on is softbank. shareholderajority of yahoo!, japan. for the moment we understand the mania about the licensing fee they are charged by yahoo! for you who japan. they want that to be reduced. in terms of the investment into the tech, but it seems that time is ticking. monday is when you need to put up or shut up. guy: watch the story carefully. as we take a break, i want to show you what is happening with the south african rand.
session and it has been a busy week for the markets. first up, a bitter pill for what would have been the biggest deal in the drug industry. the one of its if the billion-dollar merger terminated the $150 billion merger terminated after the government proposed -- hans: after months of negotiation talks between orange collapsed, the deal to consolidate the french telecom industry too complicated. just before we get to the last chart, let me do that and we will kick it around, the land of the rising and the setting yen is the title for this one. japanese currency's surging against the dollar. if the yen is the big winner than the boj is the big loser.
watch this space. plenty of people talking about big moves coming up from the authorities in japan. but what about this deal. the number of headlines over the last few days about the number of failed deals under obama. is that coincidence or significant? hans: i think it is significant. it gives a sense to which the obama administration is willing to use rhetoric, and the cold, hard scalpel of the treasury department to scuttle some of these -- heart -- to scuttle some of these deals. there is a great deal of reselling inside the white house that they were antibusiness, that the stuff they said was not that bad, that the business community was too sensitive and complaining too much. it looks like now the obama admin efficient does not care about the charge. they're willing to implement more populist policies. frankly, the don't see much bothered about it. guy: you come to the end of it,
and it is fascinating to see what has been done or not done. some really big deals not going through. let's talk about central banking. another chart that matters to mario draghi is inflation. the ecb president said the central bank will not surrender to low-inflation. yesterday, draghi reiterated that plenty of tools remain. that does not include the financing of fiscal stimulus. i guess that would be illegal. if not, then what? that's the question. let's put that to the bloomberg news senior economic correspondent. we talked about tools in the box. helicopter money is apparently not in the box. we try torough as understand the relationship between the ecb and of the central banks around the world and what policy positions they are likely to put forward. what is left? >> for a start, draghi and his
colleagues are giving the mantra that they have plenty left. if we look at the other details from yesterday, for example, in the accounts of the last military policy meeting, we can infer there is only one interest rate cut left before they have to say, that's it. then we get into uncharted territory. at the same time, that is why we having this conversation about helicopter money which would be a bold step. definitely. hans: when i walk by your desk in frankfurt, i try not to steal anything every time, but you have some of the monitors on your screen giving you a sense of what the market reaction is. does the market believe that the market can do anything more than another round of cuts? do we have a credibility gap? >> there was a pretty big piece of analysis from deutsche bank
which pointed out that in a lot of the asset classes, certainly in the currency market, the markets simply have not had the reaction to the last round of stimulus in march that the ecb might have liked. if we look at the number one indicator, the euro, it has gone in the wrong direction. there has not been any rally on the back of the march stimulus. that would lead us to more skepticism that the markets really believe that what will come next will make any difference. guy: interesting to compare and contrast the ecb and the boj. guyjeff black joining us out of frankfurt. stay with bloomberg television. don't miss our all-star lineup from the workshop. we will be speaking to all over blanchard. -- oliver blanchard. they will be joining us from the shores of lake como. apparently it was a little