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tv   The Pulse  Bloomberg  February 16, 2016 4:00am-5:01am EST

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francine: european stocks, the longest rebound of the year. central banks supporting growth. investors say mario draghi will deliver action in march. brent crude above $35. a bloomberg report that saudi and russian ministers will meet. angela merkel post a $5.6 billion loss after a classic jump eye moody's. -- classic jump by moody's. ♪ francine: welcome to "the pulse." i am francine lacqua.
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let's get straight to the markets, because we are seeing european stocks are hitting for the longest rebound of the year. that follows the global equities higher. central banks will try to support growth. up 0.4%. nymex crude at 30.6% -- 30.6. this is a crucial week for negotiations over brexit. let's get straight to the bloomberg first work news with nejra cehic. nejra: brent crude has advanced above $35 a barrel above -- amid speculation that some of the big producers will cooperate. saudi arabia's oil minister plans to meet with his russian counterpart later today to
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discuss the oil market. venezuela may also attend. china's cabinet is said to be accepting lowering the provisions bank must set aside for accepting loans. -- close to the minimum level. new credit surged to a new record in january that goldman sachs says the worth of the credit market is probably over. it is waiting for signs the situation has stabilized so it can place cash back. the magnetism of the yields are also drawing investors back. day -- 24news, 20,000 hours a day. francine? francine: stocks rebounding this morning. --t well above $30 a barrel brent well above $35 a barrel.
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for more on investing in , we are joined by nick gartside. nick, great to have you on the program here at it is not market turmoil. last week was market turmoil. now this is the biggest rebound of the year. volatility seems to be the name of the game. cohen --n -- nick -- nicholas: we are seeing slow growth and anemic inflation but it is not deflation will see a lot more volatility. from an investor perspective, that is a lot more opportunity.
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francine: the struggle i have is i do not understand why we had a huge selloff last week and why everyone is -- this week. nicholas: we had qb five or six years ago. -- is not qe it is more negative interest rates. the market has got to really adjust to pricing in negative interest rates which has a different dynamic than qe. negative interest rates increase volatility. francine: the problem is half the people telling me this is a terrible idea because it hurts next, at the end of the day that is going to hurt growth. the other half saying they do
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not have any other choice. it is the only way to go. negative will be much deeper. nicholas: that is right. we have seen the start of negative rates. rates will go a lot more negative. impact, not in terms of solvency but profitability for certain banks. next are in a completely -- banks are in a completely different place. a lot more equity and a lot less bad loans. francine: as the markets rush to safety. to president vowed yesterday deliver more stimulus is it looks like the financial tournaments -- >> in recent weeks, we have had weaknesses, increasing concerns about the prospects for the global economy. volatility and trade data have
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been weaker than expected. turbulence and financial markets have intensified. commodity prices have declined further. in light of the recent turmoil, we will analyze the state of transmission of our monetary policy of impulses by the financial system. in particular, by the banks. factorsr of these two raise price ability, we will not hesitate to act. the following rices were amplified that banks would have to do more to adjust their business models to lower growth, lower interest rate environment and to strengthen the international regulatory framework that has been in place since the crisis. that is mario draghi, the ecb president. you believe negative rates are
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here for longer. they will go even more negative. mario draghi promising to do more stimulus. yellen is saying it is going to be more difficult to hike than i thought two months ago. how much work in central banks do? nicholas: central banks can do a lot more. you heard draghi. we will not hesitate to act. that means more negative interest rates. it means more in the root -- more in the way of qe. when you look at the lack of growth, in particular the eurozone, and look at the lack of inflation. they have to do a lot more. a clear message there. francine: will it work? it has driven -- it is driven by deflationary pressure from china and oil. nicholas: there is a little bit of that. are they pushing on a piece of string? the reality is there is a lot in that central-bank toolkit. the other healer is time here
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thanks are in a much better place -- his time. banks are in a much better place. ultimately, it is about time. francine: how much before it all crumbles? we have always been promised on governments to do more. i am by new time, maybe one or two years. you put in the structural reforms. reforms that are still slow to come. nicholas: this is an evolution not a revolution. you are absolutely right. if you look at certain countries, it has happened. look at island, look at spain, they have done a fantastic -- look at ireland, look at spain, they have done a fantastic job. we are getting over a debt crisis. the unwind of that equally -- the ecb is doing a fantastic
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job. more easing is exactly the response needed. francine: are they not doing too much? when this in's, it could end very badly. the impact on yields is huge. nicholas: arguably, they are not doing enough. we could look at it the other way. think of the scale of the problems. growth in the eurozone will be 1%. inflation will struggle to get a little bit above 0%. that is not satisfactory. optimally, central banks need to do a lot more -- ultimately, central banks need to do a lot more. francine: there is extra stimulus qe. nicholas: that is a counterfactual there. ultimately, it would be worse if they do nothing. francine: we are getting to breaking news about this meeting in the heart between qatar and
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saudi and russia. we're speaking to our energy minister. we are understanding he is also there get we are understanding that venezuela was there. these talks ended quite successfully. we are getting headlines. they are agreeing to free the oil production. this is extremely interesting. let's have a look at the price of oil. i am sure it has had an impact. the picture for oil, certainly $29 .99 -- $29.99. we will dig a little deeper and bring you the very latest. stay with "the pulse." january acceleration expected to pick up. a rebalancing of the basket. reading --nths first
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2016 possible first reading. to slash costs. why the never-ending nightmare for such a banks is far from over. that is what is coming up. less, this breaking news on oil. more -- we will have more. ♪
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francine: welcome back.
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we are getting some breaking news out of qatar and saudi oil minister saying they have agreed to free production could -- free production. you can see brent lowered a little bit. it is still gaining. wti is falling over the news. we have to figure out why that is. maybe a little more of a cut and not a freeze. -- according to the ofar energy minister as january 11. according to our data, saudi was pumping 2.2 million barrels a day. let's get to nejra cehic. nejra: vodafone and liberty global have agreed to set up a 50-50 bench. the transaction will result in synergies of 3.5 billion euros. catchne will make a
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statement of one billion euros to reflect the different valuations of their local units. folks login diesel emission test volkswagens diesel scandal wade in 23.4% competitors picking up shares, including a fiat preiser. european cars climbed. -- the embattled mining company is hoping to sell assets by year-end. will earnings beat estimates despite losing 5'6" billion billion?- losing $5.6 disney has announced filming has begun on star wars, episode eight. disney has revealed many sealed
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el toro and laura dern will join the cast. that is your bloomberg business flash. francine: let's get more on oil with javier blas, joyce's alongside nick gartside withgan. -- nick gartside jpmorgan. javier: production has been disappointing. too much to ask for this meeting that we know. the agreement to keep reduction at the levels of january 2015, very significant. indications by saudi arabia and russia that they want to do something to stop the presses going down. step byld be the first oil-producing companies to try and start managing again. for the last year and a half, all the message from saudi
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arabia and russia has been let it go. the market will set the price. we will just produce. francine: it is significant they have decided to freeze. the first message was -- javier: this is a repetition in some way. channel back negotiations. -- $10, a year later [indiscernible] the first agreement that was kept secret was oil countries, venezuela, mexico, the first thing they agreed was less freeze conduction -- freeze production. let's not continue to engage in a two ply war. this could be a positive for markets. [indiscernible] too much to ask for a first meeting. not involved in this
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deal. how do you accommodate iran in a surprise freeze? it is very difficult here it -- difficult. if you compare where i'm running -- where iran is compared to saudi's, reduction is pumping in january. the month that is been used as a reference for this agreement. -- 2 billion barrels a day. -- for those the two countries in reality, it is easy to agree to keep production unchanged, because they are close to a record. barrels.e to a billion how do you accommodate iran? how the convince iran to rein in production? that is a big question. francine: how do you view oil? this translates into your world.
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nicholas: javier is right. in the think before -- if you think before it was a lack of demand for oil, now it is too much supply here at the longer-term view is very positive. francine: what does that mean for market shares? do they negotiate market share? to the have the power to really change? nicholas: we do not know what happened in that room. we will try to find out it we suspect a little bit they have agreed on a headline number for production. this is insignificant. you think of the situation between russia and saudi arabia was only three months ago ahead of the last opec meeting in december. saudi arabia was trying to take .arsh -- market shares russia was taking market shares from saudi arabia in china. saudi arabia has long considered -- they would engage on a
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significant market share war, trying to produce more than the other good now they are coming together and saying ok, there is a problem. let's sit down and try to negotiate a solution. maybe we are not seeing oil prices back to $50, but i think that he rated and russia have tried to do today is put a floor on the market. we don't visit that kind of scenario that goldman sachs put out saying that isis would go into the teens. just saying that prices would go into the teens -- saying prices would go into the teens. this is worse than the payrolls in the u.s. asked line does that change -- u.s. does that change your forecast? mikio: oil move -- nicholas: does that -- oil moves around and a volatile fashion? it is going to take a long time to be through at longer
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inflation rates? the other thing with oil is its risk with -- the mood of the market at the moment is an increase in oil is pretty good when you look at risk assets. francine: why are they so correlated? it is crazy to think about, because we keep saying the oil price has to do with oversupply. many market trade on oil. oil benchmark for a possible recession scenario. nicholas: previously sessions, a decline in the oil prices has been a good lead indicator. that is when everyone recession watch greed, falling oil equals recession. increasing oil, which is bad for consumers is seen as pretty good for economic growth. nigeria, saudi arabia, russia come all of these countries see the price of oil start to cover -- start to
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deficits -- that is positive for inflows of money ies, inose countr particular places like nigeria and brazil. francine: hobby, vicki so much. nick garside stays with us. up next, investing in a world of some zero yields. ♪
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francine: with less weeks safe havens set the yields on the german two-year to a record low. let's discuss investing with neck gartside. it, thank you for sticking around. we had a little bit of breaking news for oil. by, given thatb they have done so much? nicholas: what the ecb is likely to do is cut the deposit rate even more. they will extend qe, likely in terms of the rise of qe and the amount of arms they are buying. francine: what does that mean for german yields? nicholas: german yields go lower so you have that 10-year-old -- that 10 year german bonds. you have 20 basis points or so
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of lower yields. production is not germany, it is spain and italy. francine: you think yields have dropped too low? mikio: when you look at european yields, the reality is they're going to drop lower from where they are now. it spreads to germany. they probably have from current levels. year, we were looking at the yen. greece possibly exiting the eurozone. now portugal is the first one to pop the rules, saying brussels to tell me what they want on budget, i do not care. nicholas: portugal is under control. it is not getting wildly out of control. portugal is the standard. investors should look at the recent selloff. neck gartside, thank
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you so much. of next cap -- we will hear from the ceo, coming up next. ♪
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francine: welcome back to "the pulse," live from london. we're just getting some breaking news out of u.k. inflation. let's head straight to the terminal with mark barton. mark: inflation cladding to its highest level in a year in january, driven by motor fuel, food, and clothing. consumer prices rising .3% following a .2% gain in december, bang in line with economists core inflation, which mark carney likes to look at. he told us back in november, that excludes volatile routed
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energy prices, which slowed to 1.2% from 1.4%. real inflation remains well below the bank of england's 2% target, with oil prices remaining near a 12 year low. pay pressures are weakening as well. officials say the economy doesn't warrant a rate increase from the record low .5%. if you like at the morgan stanley gauge, which protects when the next rate increase will happen, it has been pushed out to 40 months from eight months at the beginning of the year. central to the outlook for rates is pay growth, which has come off the boil in recent months despite unemployment reaching a decade low. we will have further details on pay tomorrow. have a look at the ukip on market, in light of that data. the yields last thursday fell to a record low 1.3%. we're up to 1.46%, less appetite for risk today,
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boosting equities, investors pulling money out of the bond market. good news in the oil market in the last 20 or so minutes. saudi arabia and russia meeting in qatar, agreeing to freeze out. this is the three-day chart, as 2.4%as 6.5% today, up after a three-day gain to roughly 15%, freezing output to january levels. the nation still wants to meet the demand of its customers and the oil minister says that it rebounded 15% in three days. i think somewhere expecting more. we are very hopeful when we look at the oil market. francine: you are absolutely right. if you look at what people were pricing in, this may just be a first step. let's get to the first word of nejra cehic. nejra: thanks. saudi arabia and russia as you
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heard,, have agreed to freeze oil output after talks in qatar. the oil minister said that the nations will maintain output at january levels. ministers from qatar and venezuela also agreed to. agreed tobinet has discuss lowering the minimum provisions banks. a rapid increase in sour debt put banks bad load coverage ratios close to the minimum level. the news comes as the broadest measure of new credit search to a record in january. goldman sachs is the worst of the credit market selloff is probably over. it's now waiting for a sign that the situation has stabilized so it can put cash back into u.s. junk bonds and other corporate debt. sentimentys that one becomes less negative, the magnetism will draw investors back. global news, toy four hours a day, powered by 2400 journalists and 150 news bureaus around the world. francine: thank you. anglo american has reported a fourth consecutive year of
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losses. has plans toow sell even more mines. the plan was thought to be too ambitious and has cut ankle's crit -- anglo's credit rating. >> i think it is a matter of stripping aspect of the core, rebuilding the base, and making sure we are fit to go forward in the most strongest way we can. i think we have been making changes over the last 10 years that have been in commensal. i think it is time for a bold step out. we have been working on that strategy over the last couple years, and i think in this market the opportunity will reset and start with a different looking portfolio, making simple moves. francine: with us is how the javier blas. when he sat down, we were talking about mining and oil. javier, we had that breaking
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news in the last 22 minutes, the freezing oil output. that disappointed the markets. did, because traders were thinking a production cut was way too much for a first meeting. this is the first time we know publicly that the ministers of saudi arabia and russia were meeting. until now, the relationship has been quite acrimonious. they were fighting for market share. an open freeze is a starting point more to come, and the market is disappointed t, but still, you look for the next few months, probably opec and russia have different data for a bottom on the oil market. francine: john, how significant is this? when you look at the price of oil, commentators were saying, anything.on't greet
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they decided to freeze production. >> i think the market will take this very well, and it will probably left commodities and equities across the board. maybe that sentiment is connected to the idea that global demand is rising again, a nd we also expect the low oil price to cut supply to fall around the world. the saudis have been particularly aggressive in trying to put u.s. shale oil producers out of business, in trying to grab market share back from russia, who they are particularly upset with, mainly because russia has been dealing with iran. there are a whole lot of different political things going on here, but it does seem to lift everything else, all other commodities, to rise. francine: are you worried about the correlation? is it confusing miners and oil, or is it an indication of a possible recession? >> i'm not sure why everything
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so closely correlated. i think some of it is sentiment. some of the funds -- they decide they will go more positive on oil, a more positive view one other commodities as well. perhaps it is because the sovereign wealth funds slow their rate of sales of equities, perhaps commodities and related instruments, into the marketplace, and that allows markets to naturally turn around. er, youe: javi wrote about oil as a benchmark of where we are going. miners have it worse, and so does anglo. javier: we have seen them suffering a lot more. while in oil, we can see a recovery at some point, in mining, there are many commodities that has a much lower recovery. iron ore, much correlated to what is happening in china, and with the change of the economic structure the chinese economy, moving away from investment into
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consumer led, you need a lot less deal. coal also facing structural problems, coal may never enjoy another boom market. even aluminum with a very challenging market. only copper, zinc, nickel offering a more positive story. if you contrast that with oil, oil has the tough time, but not nearly as much as the mining industry. francine: you look at energy and coal, the cheap price of oil, john, who are the miners that will do better? does it depend on if they take the pain earlier? does it depend if they stick to dividend? >> this is going to depend on the shape of the recovery. i think we are generally agreed that we are at the bottom of where these commodities are, and that there is a pickup. we have seen prices improve. i think we are either at the end
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or very close to the end for some commodities on the de- stocking cycle. what happens, as manufacturers finish 30 stocking, -- finish their de-stocking, it gains momentum. that is a really important factor. i think that is what is like we to continue to turn the market around. my feeling is that massive fails from sovereign wealth fund have hammered equity prices down to low-levels. we're down to 2008 levels, yet we haven't had a global banking crisis, an asian crisis. so what is the crisis? the price is just slower growth in china, and the oil price collapse causing sovereign wealth funds to solve everything. francine: i guess this is what was mispriced. we always thought that if the price of oil goes down, that means production costs are better, and that is a boost. we didn't think about the sovereign wealth funds. javier: you're right. every time oil prices go up, we
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have a recession, particularly in the united states -- that is happen for 75 years. seen the global economy suffering because of low oil prices. china, driving sentiment, helping to bring equity markets down. particularly oil-related ones are very heavy, so we're selling bankshares and driving sentiment negative. also let's not forget that the global economy is a lot more dependent on emerging markets than it was 20 years ago. emerging markets, if you take away china and india, are generally oriented to commodity prices. brazil, russia, south africa, heavily dependent on commodity prices. those economies are entering to trouble, and there is this perception of the global economy heading down. francine: john, miners come in all shapes and sizes -- which one wils will do better?
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are going to see more consolidation? >> this is the first major, major restructuring i can a n remember at anglo american. he's doing the right thing, but he is talking a rhetoric that says he is frustrated and will force it through. i think is overblown the situation. anglo as much lower debt than any miners. it has an ability to cut costs much more than other miners. i think it's will leveraged for the upturn. ,ou could look at rio's balance lots of cash in its portfolio, and people telling rio to go out and buy copper assets. you think we'll see a change in sentiment, back toward more positives. so has a big oil business, it will still be negatively affected by lower oil prices for quite a while. one has to be specific about buying miners. for me, anglo is the stock
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to go for. rio is more defensive. glencore, more of a wildcard, carrying more debt. market trading business could do pretty well in this environment. francine: because of volatility. thank you so much. angel.yer, sp javier blas. coming up, we have plenty more to talk about. is the eu too dependent on banks of financing? the men in charge of financial stability and the european commission, coming up next. ♪
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francine:. welcome back about an hour ago, we found out that saudi was meeting with russia, and we now understand that they have agreed to a production freeze. markets are disappointed on the back of it, as we have a look at what the price of oil did. it went down a touch. this is because a lot of traders are telling us that what was priced in was a cut. a lot of people are saying that this is just a first step. the russian energy minister is coming out in a statement on their website, saying that four countries are ready to freeze output at january levels. we will get more on that.
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we will have to figure out whether venezuela was part of that. russia and saudi have agreed to freezing production. we will get more of that breaking news as we get it. let's get to the bloomberg business flash with nejra cehic. nejra: thanks. vodafone and liberty global have agreed to set up a 50-50 venture to combine their mobile and broadband businesses of maryland's. -- businesses in the netherlands. vodafone will make a cash payment to liberty of one billion euros to reflects the different valuations of their local unit. lkswagen's diesel emissions scandal ways on them for a fifth straight month. it fell in january from 25.6% a year earlier. competitors picked up share in fiat chrysler and ford. european carmakers climbed in january.
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anglo-american has raised its target for disposal this year and will cut thadebt. the embattled mining company is hoping to sell a billion dollars in assets by year-end. in 2015, $5.62 billion news that comes after their credit rating was cut to junk last night. that is your bloomberg business flash. francine: thank you so much. the man in charge of financial stability at the european commission has called for greater diversification of financing. reliance andrrent he says it is risky. >> we are overly dependent on banking financing in the eu, especially in the continent. 70% of financing is done by banks, and we need to diversify. 2009, it showed that each time the bank is sick the
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overall economy is in trouble. this is why we need to grow the financing and need to diversify. francine: our next guest might well agree that it is a bad idea to rely on european banks. ed robinson says europe's banks face a frightening future, and he joins us now. great to have you. we talk about banks in, day out -- banks day in, there. the nightmares and over for european banks. >> that's right. they're continuing to go through this crucible that start at 7.5 years ago. i think what we saw last week mpatience.ent' in we saw it at deutsche bank and credit suisse. there is a sense of confusion the marketplace, whether they have a sense of winning confidence, whether they have way takes to push through their latest plan.
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that all got exacerbated last week by the numerous forces at work in the market. francine: what is going on? we had the breaking news on oil -- some of what traders are telling you is that they would like disclosure of exposure that these guys have to oil. others are saying that the problems is ceos don't know how they operate and would like to see more action into the securities side. >> i think it is both, a combination. whenever you have a lack of transparency it will exacerbate the problem. that comes at a time when new ceos are implementing structuring plans, closing businesses, trying to withdraw certain geographies. everything is so uncertain. we so last friday that socio-general announced that it has exposure. they had exposure to a lot of petroleum borrowers.
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that clearly weighed on the stock. you have the confluence of rolling oil prices, pressure on the borrowers, and a big ban in your -- a big bank in europe. francine: the other argument is, because of regulation, european banks will have to shrink. there's no investment bank left. is that risky for us, as europeans? >> i think that if they try too much, yes. you want influential and cogent investment banks that can all those services to their corporate clients. that is an important part of the political economy in these countries and the eu. they are trying to find that balance. i think that is what is a difficult thing. the first iterations of these cuts we saw at barclays, credit suisse, deutsche bank, they tried to preserve more of the investment banks. now the market is saying, well, you will have to cut even more. that's coming out of time when
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the slowdown in china, falling oil prices, are compounding the difficulty of that situation. i think what everyone helps, certainly stockholders, certainly the customers that these banks hope, are that the market doesn't force the hand of the ceos, that john cryan and staley are given ample time to implement these programs. you can't change these programs and a quarter. francine: of course. you have to be careful not to cut too much. thank you so much.e up next, david cameron's charm offensive as th continues as the clock ticks on brexit. that's next. ♪
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francine: will come back. this is your oil check. this is the picture across the board, looking at brent and wti. brent is one i want to focus on -- it is still gaining, but by a lot less. this is after an hour, although we understand that saudi and russia and two other oil producing countries have agreed to these production. this may be a little bit of a disappointment, because a lot of what was priced into the market
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was a production cut. we had some great analysis by javier bals, saying it was a first that. at police we know they are ready to act. in his trip to paris, david cameron failed to win over francois hollande ito his reform agenda. let's get a hans nichols in berlin. hans, if you look at the pound, we are seeing quite a lot of volatility. is there any room for optimism? hans: well, there is room for optimism in that everyone getting together will try to hammer this out. what you shouldn't be optimistic is that these hawks are being undertaken in the spirit of goodwill, but significant differences still remain. heading into that meeting, donald tusk, the president of the eu council, said that the risk of breakup was real. basically, at least with friends in germany, what sort of
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preferences british banks will have. englishch argue that banks, british banks, would have an advantage in london. with the u.k. once is that they don't want to be tied into euro area weakness. that is the challenge. it seems like we have a ways to go, but francine, this will all be hammered out, potentially at this brussels summit. francine: hans, pulls are indicating that he's gaining ground in the u.k. how close is it? hans: the no camp is gaining ground, eight points down. is compared to a month ago when it was a 20 point spread. clearly the no cap is gaining ground. francine: hans nichols, our chief international correspondent. "surveillance" is up next. we will go through the price of oil, discussing production freezes from saudi, russia and two other opec countries in a
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future forecast. we will also talk about what aid yei said ♪
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francine: freezing oil production. saudi arabia and russia strike a deal. markets are disappointed. they were expecting a cut. european stocks on the rebound. central banks willing to support growth, investors say mario draghi will make action in march. anglo-american posts a loss after being cut. in an interview, the ceo says he will sell more mines. i'm francine lacqua in london with tom keene in new york. the most significant news we have had over the last hour is saudi and russia. looks


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