Transcripts For BLOOMBERG The Pulse 20240622

I am francine lacqua. Manus it is. I am manus cranny. First, the global standoff. Shares plunged the most since 2000 seven. Francine that european stocks are down in the red. Commodity prices sinking to a 16 year low. Rest ine will have the a moment. Lets get at the very latest in europe. Caroline, take it away. Caroline disaster is what one chief officers calling it. We are seeing a major selloff. Shanghai composite, check that out. Down 8. 5 . The worst since 2007 despite moves by the Chinese Government to stem the bloodshed. They are trying to support with pensions. The rumors are reserve ratio cut to the banks that did not materialize. Down goes asia and the affect on your. We are in correction territory. And the effect on europe. We are a bear market. If we close at this level, we will between 2 of our previous high. Not one single stock is rising. Concerned about Global Growth and infrastructure. Bmw, feeling the pain. Credit squeeze saying that the auto market will feel much of the pain when it comes to chinese exposure. At the equity markets. On the stoxx 600, a sea of red. Not one single Industry Group is rising. On the downside, minors filling eling the pain. E technology is selling golf. Those exposed to asia, they are feeling the selloff. Some of those who sell into asia. And look at the commodities. No wonder miners and Oil Companies are falling. 45 for thebelow First Time Since 2009. Copper is selling golf. China, the second largest economy in the world, you see the selloff with the mining companies. Copper is currently lower. If youre looking at fx, all about the recalibration of one people think the Federal Reserve will raise rates. It has been pushed back. If you look at the Federal Reserve futures, people think we were not see it in september. 28 think we will. They used to be a majority and now pushing it back to december. The dollar is falling. That means it you are seeing the euro on the rise and the dollar falling and the yen and demand. A look at some of the bond market moves. A search forg for safety. Money moving into germany. 2 thely, the u. S. , First Time Since april. Meanwhile, the story in greece and the snap election being called. Back to you guys. Francine thank you with the latest on this market route. A big funk. Manus we saw the headline saying a bloodbath and that sums up the mood. To the epicenter. Shanghai. Greg, a good day. Another move and another new move to let Pension Funds by the market but to no avail. Yeah, i think the pension Fund Decision is a little bit off into the distance. Is not something that will immediately turn the markets around particularly after the yen devaluation. And disappointment about the reserve ratio you mentioned. Howe how long the low can the shanghai composite go . Greg turk well, that is a investorsnd certainly , the markets are waiting to see how the Chinese Government reacts and if they respond with measures like in july buying up chinese shares and buying up margin position to try to support the markets. And i think thats probably the government will Say Something in the next few days about this market route. Manus greg, thank you very much. On at the latest from shanghai. The middle east with a dubai stock heading to a bear market on opening. Potter is standing sam potter standing by. Beginning in asia a yesterday was a hard day. How bad is it looking this morning . It started out pretty bad after falling 7 yes yesterday. 7 tever may indices dropped yesterday and today more than 6 at the open. Things have come down a little bit. At one point, dubai had erased all of the losses a short time ago when i stepped away it was a little bit to down. Broadly speaking, negative across the board. But, red lights everywhere else. Francine can you explain to us . We saw this big, big drop. And we are recouped some of the losses. Is it because they are expecting an opec meeting and maybe prices to be kurt held . Curtailed . So. Potter i do not think it is likely investors were calculating the losses were overdone. I mean, a lot of Retail Investment locally. As a lot of people have confidence in the Companies Listed here when they see a selloff of the scale we saw, probably natural they will calculate valuations that looks stronger now. Perhaps trying to buy back in. Is opening andt that seems to be a bell for the middle east and will be interesting to see. The global consequences here are fairly substantial because you have the uae who joined the msci last week and saudi opened for foreign global investing. This has got a global ramification . Sam potter definitely. Saudi has qualified Foreign Investors. A couple of months ago and that means investors can now trade directly on the saudi stock exchanges, the biggest in the region. That was supposed to be a big moment. Web seen very little we have seen very little excel decline sprint uae mainly as you mentioned, members of the emerging index. Show these to markets have been developing and maturing and everyone thought positivesci would be for saudi opening to Foreign Investors and nothing but good times. In truth, we are finding out exactly how vulnerable we still are especially in this region to oil prices which is a large part of the driver. First bank thank you so much. Greg turk in dubai and sam potter. Francine thank you so much. Big fall and recouped some of the losses. Another story. Us to ourt takes twitter question of the day. Where do you put your money . A little bit of flow into the euro. Into the yen and swiss and gold has moderate. In europe, the first time in february, it has strengthened to 1. 15. We saw little bit of stress. The havensis one of where people decide to put in that move money. What does it mean for the fed . What are the questions for the day. Manus Patrick Armstrong joining us. These moves in a equity markets, are we mirror itself bottom or the beginning of a much bigger downturn . PatRick Armstrong probably toward the bottom done a downturn. We have been short on equities. Thursday and friday last week, we were trading at 2000. Ist we started to do shortened u. S. Treasuries. Yields at 2 and below this morning, we think it is an area obviously investors are flocking to because of they are scared. Bubble 1. 5olin did a weeks ago. 2 10 year yield is not a good investment. Maybe a panic place to go. Greenspan calling it a bubble 1. 5 weeks ago. The fed will be raising it and hiking. , as he willke that. 25 and that will put 10 year treasuries higher. Francine the number of people will expect the rate hike in september is slowing down 24 . PatRick Armstrong i think they will do something cute, 15 basis points. To a yellen, she says it is gradual and not like the past and not do it every single month. To reinforce the message, i think she may do 15 basis points to say we started in september and not have an impact on the economy. It is symbolic. Manus our new word. Our new word is cute. The u. S. Equity market and this is what i want to understand, the u. S. , the biggest weekly drop since 2011. European stocks, volatility is ramping. Patrick, try to make sense of this. Hike . , cute rate Rick Armstrong growth some growth in the United States bring into haiku does not mean anything but symbolic, i think. In the United States and the but does not mean anything symbolic, i think. Valuations, the prices, not the way they were a few months ago. I have been short since the last few months. 25 times earnings. 70 on the s p. It is a times the value. You do not have valuation support. Europe has always been up to say it is getting neither expensive but incredibly cheap versus bonds. I do not know in the u. S. You can say that but in europe you can. And participated in the global recovery. First debate when you say you want equity exposure, talk to me about selloff . A panic selloff are something more fundamental that underpins it . PatRick Armstrong a bit of a panic that china is the end of the world. I think it is still growing. And you are seeing companies being chopped off because they have exposure. Francine it is a panic mode, what makes you say that tomorrow or the day after will not get worse . Where do you call bottom . PatRick Armstrong you do not have the valuation support in the u. S. I am happy to buy europe very soon. Maybe today we will start buying again. That is the industrials that have been hit hard and they are trading at a times earnings. That is fair. Youre in the midst of a cyclical recovery in europe. The pmi, very strong. You have weakness in china which most people knew about. They were pricing and the 7 growth potentially. Not a hard crash i do not think. A slow down and the next leg up when china starts doing fiscal stimulus. 14 trillion and a huge warchest. The Monetary Policy onside and they have done reserve requirements. Next is fiscal stimulus and thats the catalyst for probably the end of the commodity rout. Asian equities at that point. Manus it looks like throwing everything at us. Stimulus, why not . You will stay with us. Patrick, chief investment officer. Francine what else is on our radar this monday morning. Brent crude has slipped below 45 a barrel since 2009. It will expand output at any cost to defend share prices. Manus the south korean president have called north korea to apologize of what he and exchangeation of fire over a heavy fortified border last week. Negotiators have been holding talks to try to defuse the latest tensions. Kim jong on has stepped the mobilization of forces, dont leg the number of the doubling the number of units. Turkey as heading to elections for the second time in less than six months after a party miss a deadline. It will take place on november 1. Political wrangling has been a comedy by escalating has been accompanied by escalating clashes and violence spilling over into syria. Manus likely to see the star of greeces start of greeces general election campaign. Three days after creating a new political party. With one of the parties key players acknowledging the agreement is unlikely, greeks are expecting to head to the ballot box in september. For the bank how low francine how low can oil go . Our guest host also stays with us. Manus welcome back to the pulse. Webzine european oil and gas extending to 2015 low. PatRick Armstrong is here. A lowly path. Oil will. , wti starting at 40 bucks. What is your view on these commodities . PatRick Armstrong i wish we were still short. We were short on talibans ago. It may have reached the bottom. We were short on till a month ago. It is not coming from a demand weakness which a lot of people are interpreting that oil is falling golf because the chinas economy is imploding. Thats a lot of production. It has not moved yet. It is something keeping oil depressed and probably will continue for the next 69 months. I do not the oil jumping higher in the short term. Notice and as probably sustainable. A lot of production cuts. Francine lets bring in our chief energy correspondent. Er, we talk about oil day in a day out. A seems a everyday we have new puzzle. Iran said they would do everything to keep market share. How much of oil will come to the market . Vier we have expected iran will do this. Lifting by the end of the year and iran has considerably said we will try to return market share. Talking about it immediately and whatever cost. That is a very important area and the past, market analysts have expected iran will be careful not to flood the market now. Iranians making a clear statement if prices go down, we will return to previous production levels at whatever cost. Thatsage to saudi arabia if you do not make room, we will drive the price down. At a commodities are now 16 year low, patrick. We talked about your seen the commodity miners. From your perspective, are we overstretched . Oversold on some of these markets . PatRick Armstrong we do not have any position and the oil and gas right now. It is oversupply of cross of the whole complex. Oil and gas is something i started investigating last week. It is so negative right now until you get to a point where basically gets in line with the legalities, i am not inclined to be a buyer yet. They have been hit hard. Andou want to call bottom commodities, you probably get a lot of leverage. Francine youre talking about oversupply which is clear. The oversupply of the last three or four years . Oil, itarmstrong for gets resolved in the next year. The Global Economy is ticking along. Europe growth in u. S. Growth and emergingmarket growth. Demande to see market and grow. A lot of spies and the short term. Manus all jury a in liberia and venezuela, out urea and liberia, and venezuela , is there more tension in opec . Samer blas at at the time, iran said we will not oppose an emergency meeting and will increase production. It seems like a production cap. I dont see it much change from last week. We will not be going to any capital any time soon. Thinkot think the saudis their strategy is not working. It is taking time. They said it openly, it is not for a few weeks or a few months of probably the next two years. Theill have to wait until next opec meeting in december in vienna and probably what the saudis will say is more of the same. It is going to continue. Francine thank you for that. Javier blas and Patrick Armstrong. [indiscernible] oil. L on he expects the at 105 by the end of the year. Manus the latest from london. Commentator jasper joins us. Give me a sense of how much margin call there is going on at that is provoking a great deal of this selloff in equities. Is it behind it or most of the margin calls mixed . What is driving it . Jasper that is certainly an element. ,hinese markets for example stocks are down as some of the same and european equities and we have been in a bull market for so long that people are leveraged. And some of that margin and leverage is coming out and that is exacerbating the declines. You could argue it is summer lack of volume and the market adding to the volatility. Both of those combined, extreme downside. Francine what is the mood like on the Trading Floor . Our people bracing for more or call and get a bottle . Or calling it the bottom . Jasper lawler well, from shortterm trading, it is excellent. A lot to traders positioning for downside in the market and go actively short. Obviously, all so looking back over their longerterm equity is a concern just on that front it could be the beginning of one of these declines with him looking toward. One of the big ironies is you 10 styleng for these corrections just a you can buy into the markets of value. When they take place, people are afraid to buy in. Francine thank you for that. Jasper lawler. Patrick, before we let you go. You have a call on your. On the bigr take drivers. Will europe continue to rise . I do notrmstrong think so pretty talked about margin cost and things like that. You have risk aversion now. Of technical risk aversion right now driving it higher. The policy will drop in that and a weaker euro. The ecb is ready to do extra things. People are worried about the said delaying rate hike. If things get terrible, the ecb will not sit around. Francine there is qe and also a rout. How much more can they do . They canrmstrong increase qe and things to help the banks to promote lending. There are things they can do. People are more thinking about that the fed and they will not hike. Be there. B will the next wave of liquidity. Francine patrick, thank you. Our special guest. Manus all about commodities and the chaos. The index trading. We will have a little bit more investigation on that. Get excited for the 1989 world tour with exclusive behind the scenes footage, all of taylor swifts music videos, interviews, and more. Xfinity is the destination for all things taylor swift. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Francine welcome back to the pulse. I am francine lacqua. Manus i am manus cranny. Our top headlines. The week is likely to see the start of a greeces election campaign. Will first get an attempt at form of the government three days after creating a new political party. One of the parties key players acknowledge an agreement unlikely. Greeks are expected to head to the ballot box in september. For the bank brent crude and slipped below 40 five dollars a barrel for the First Time Since 2009. 45 a barrel for the First Time Since 2009. It drop more than 7 last week. Manus the global selloff is steepening. Emergingmarket currencies have dropped to the weakest levels on record. Commodity prices have hit a 16 year low. Francine the latest on the market moves with caroline hyde. It is a bloodbath. Caroline it is, five trillion dollars worth of valuation. And it keeps going. Completely andre is a read. Not one single stock rising on the dax. It is a bear market. 40 lower than the highs previous of this year. Folic utilities. The key area of concern is Global Growth. Falling utilities. China in particular. The second biggest economy in the world having the slowest growth since 1990 . The metals and grains and the miners falloff at commodity related. Nd correction territory not one single stock and drug green and everything in the red. One stock that is in a drug green and the whole of the stocks its in the green and it is spain. It is up 6 . Tobacco. Wills a new contract and be building in europe and the biggest shareholder is being prepaid alone and shares to be bought on the downside. Bloodletting on the equity markets and particular. It has slowed over from asia. The shanghai composite of 8. 5 . This is one of the worst days since 2007 for china. Even though speculation of rate cuts. That did not happen, instead more worried the fact Pension Funds can buy equities did not help much. Read across the board. Red across the board. Miners down 3 . , mining down by 4 . Not one single stock is rising. All 10 currently are falling. The concern at the equities space looking at the fx and commodities space. In terms of the Commodity Index falling significantly. 22 rob materials. 16 year low. Copper off by 2. 5 . Cutting to see oil traded lower. Brent below 45 since 2009 print is a is applied playing into this. Off by almost 3 . Gain and town is of the dollar falling. People are real mining where they think Federal Reserve will go. Will they really raise rates in september . Not according to futures anymore. Will it happen this year . Down goals of the dollar in up the euro on the back of that. Uipoes the dollar and and goes the euro on the back of that. Getting a tax havens and german debts. Yields up by two basis points. Below 2 for the First Time Since april. Mining going out of greece. Still concern about the snap election driving up costs. Francine thank you. Caroline hyde with the latest. Brent crude below 45 a barrel for the First Time Since march 2009. Manus as iran said expand at any cost to defend market share. We are joined by chief oil analyst. Talk from iran in oil and not guns. [laughter] they have lost 1 million a day. Arenow the sanctions lifted, they want to make sure as they come back. There is a market for them and there will be. They are discounting their oil and it will continue. It is something we have seen in opec itself. Market sharee of and they want to guarantee particularly in asia there is demand for the crude. Francine how difficult is it it is difficult to collect the bottom at the moment. Amrita sen it is a number now. You are hoping producers are getting at 50. A number. Oming china is playing a bit part. A macro story. Everything off of oil. We could go into the low 30s, wide not into the 20s . Why not the 20s the 20s . I wanted toer the email. The number of active rigs raised in the u. S. Theres no stopping the u. S. There is whole host of negatives here. Amrita sen the issue is a problem for the market is there betweenk between lag the decision and when you see the rigs go up. Rally asr earlier, the that is kind of where we are. Prices and wed a wouldve seen response. People are saying, the bottom is in. And turning points here. And they starting to say we will bring the rigs back. Now they will take them back off again. [laughter] it is so difficult to predict. It is a guessing game for the bottom. What is your view and two years . Can we forget the next 12 to 24 months as say the price will stabilize around 50 . Starting to do significant damage and with counted nearly 5 million barrels. Put on hold are canceled. In canada, some areas below 10 oil. Below cash. We know it is not sustainable. The real issue is nobody is talking about it and very little. The saudis are pumping get to maximum levels. It will be very quick. We think the second half of 2016, about 12 months from now you should see prices rise. Rise. Sk is we got a sharp back into the 70s and 80s because of the buffer is not there. Manus saudi arabia has a whole host of issues not least the fact they will have a deficit as is much of 20 . They have deep pockets and we know that. As well. These are big issues. And they have fiscal pockets as well. Amrita sen thats why the focus is on the u. S. Like you said, saudi and have deep pockets. But again, the strategy have to work to work within two years or so. If it drags on for longer, given the yemen war which is really put a significant stress on their expenditure. It has to work. Thats why they need to see prices go up that the two francine will we have an extraordinary meeting of opec . Ready to do something . ,mrita sen absolutely everybody calling for emergency meetings. But, really the policy is when the lower prices for the same period of time. That is the policy. Whether it is working are not as a separate debate. We think it is working but taking longer. I do not see is a meeting before december which is the regular meeting. Sustainedt is a period of time for low oil . Amrita sen i was say two years. To betweent to get then and now. Francine thank you. Amrita sen. Manus greece prepares for fresh elections. We hear from both parties. Francine welcome back to the pulse. Manus some of our top stories. Blasts havestrials left at least 10 dead. An employee [indiscernible] was killed at a plant. The latest disaster after number reachedilled in a blast 121. Firefighters are among them along with seven Police Officers and does it more people are still missing. Shares plunging the most in 18 months after the company confirmed the bigs production lines and china will stay closed for two more weeks because of the deadly explosion. An affiliate said operations will only resume when it can come from the safety of employees and surrounding areas. 5000last destroyed nearly vehicles awaiting delivery. Manus the death toll other british air crash could reach 20. It happened saturday when a fighter jet and a display crash into a road in sussex. The Investigation Bureau is currently looking into the incident. Rancine to greece now the resignation of Prime Minister alexis tsipras. A snap election expected to be called soon and parties are lining up for a goal at forming a government. Straight to Tom Mackenzie. How do we expect this all to play out . Battle, a newical democracy and the Largest Opposition Party to the newest Opposition Party which is popular. Expected to form a government and now it is up to see if they can do the same. Mps withwith the 25 syriza that split because they were opposed to the bail out. They have a few days to cauble togethera cobble and that is almost impossible. They are heading very likely to a campaign. On thursday, the president agrees likely what has parliament and that is when an official campaign is likely to kick off. Francine manus you spend the weekend down with 2 of oldses most greeces radical parties. How was that . Tom mackenzie it was interesting. We spent part of saturday was the far right party here. 70 members of parliament and accused of having thing theynks some deny. Theyre hoping to increase to 10 and confident they can make it to the thirdlargest party. They will capitalize on immigration and will of the center from syriza opening up space. We spent time with a Popular Unity, left wing party. Splitting from syriza and they want a complete reconstruction of economy. Take a watch at the package that we filed from athens. This was the mood and the headquarters of the far rights party. We were given a rare access to the nationalist party as members prepare for was expected to be another greek election in september. The mp said anger at further austerity coupled with greeces migration crisis would boost support for the party. They are going to vote us because of are angry for somebody else. They will vote us because they heard us speaking. They have seen us and know us. They know we are not going to betray them like tsipras and others did in the past. Tom mackenzie he said the party draw support from a wide base. Despite the leadership facing criminal investigation. Popular inxtremely new orders and we will be even more popular and the agricultural and farmers. The army,members of navy, police, fire department, coast guard. Whoever is dealing with criminals. Seats innzie won 17 januarys election is accused of being antiimmigrant and neonazi. Something they do not. We are not nazis. We are greeted nationalist. Tom mackenzie he said golden door people will be out in force. Be out industries. Thats what we know best of all. Out in the streets. Migrants should feel afraid and areatened by the once that taking advantage of them like the syriza government asking them to come to greece and you see how they live. They need to be afraid of them. Tom mackenzie across town, a different gathering, the new party formed by former syriza members opposed to a third bailout. An outside a bar. The end of the first day as greeces thirdlargest party. One determined to a band greeces latest bail out deal. European union and commission [indiscernible] from the support they gave two days ago to tsipras and in the elections. Also said to the greek people, prosperity. Had new memorandums. In greek politics. But it ise struggled [indiscernible] Tom Mackenzie Tom Mackenzie in athens for bloomberg. Movementnzie they use the Youth Movement and i spoke to him on the phone a few moments ago. He said do not be surprised if they get to double digits. And a golden door party, genuine concern that will make real and whats inroads. They said they plan to go to the islands to try to rally support for antiimmigration message. Francine great work. Tom mackenzie in advance. Manus tensions simmer on the most heavily fortified border on earth. The length on the northern side of korea strait after the short break. First seen bank welcome back to the pulse francine welcome back to the pulse. Manus in korea, toss continue. Have sides francine the latest from seoul. How long can the talks go on for . Reporter they have been going on for a day already. And that follows a 10 hour saturdayhat began on and on sunday already. One of theitely longest rounds of talks that north korea and south korea have ever engaged themselves in. It is dems to his house are. It demonstrates how high the tensions are. The leaders are meeting at a border village that is on the Korean Peninsula is just the fact it is showing theres a lot at stake and a lot of things that could flare up if these tootiators are ever failed produce an agreement to defuse tensions. Manus why are they mobilizing forces when the talks are ongoing . It is almost like a doubleedged sword . you are quite right. Ways a very old traditional of raising the stakes. They are basically trying to scare each other and to yielding concessions. I do not think they mean to have war against each other. It is just a first for north korea. It is not good for the economy of south korea book of President Park is quite occupied with raising the growth rate. War what not help. Scare each trying to other. Have not the tensions been this high for quite some time. You are seeing war is almost completely improbable. The centralbank has had to take this quite seriously. It has an effect on how much money investors put into the south korean economy. yeah, it is true that the fear of war has appeared again to a certain degree. Especially among investors who do not want to see this type of instability at the time when they are worried about the fed rate hike and chinese markets. It adds to the trouble they are having. At the time market its not really doing well. A missed a lot of uncertainty and the tensions do not help. The central bank is doing what it can to show the world it is basically trying to control what is happening here but really up to the advisors of these military leaders who will basically determine the fate of the economy for the next week or so. Francine thank you so much. Sam kim. Manus for those on the radio, first word is up next. For viewers, second hour of the pulse. Francine it is all about the market and the rout. And the selloff. 5 , the worstdown since 1999. Francine the dax heading for a bear market. We will have that. Manus the equity bloodbath defense. Dax nearing a bear market. Francine after chinese stocks slump the most since 2007. Below brent crude drops 45 a barrel for the First Time Since 2009. The bloomberg Commodity Index sinks to a 16 year low. Good morning to our viewers in europe, good evening those in asia, and a warm welcome to those waking up in the u. S. I am manus cranny. Francine i am francine lacqua. This is the pulse, live from london. Manus global selloff deepening, plunged thees have most since 2007 and european markets in the red. Francine Commodity Prices have sunk to a 16 year low. Manus lets get to market moves with caroline hyde. Crushed lowerties and volatility higher. Selloff across the board. The dax close to a bear market. These levels, more than 20 of previous highs. Barren when it comes to green, everything in the red. Rwe, Deutsche Bank concerned about, Global Growth. This will be hitting miners. Cac, not one single riser. Miners on the downside. Ftse 100 and correction territory. We are seeing the worlds billiton,ner, bhp leading the charge lower. Seeing the pain in the equity market in europe. Spilling over from asia. Some phenomenon moves in terms of the shanghai exchange, worst day for attorney stock since 2007. A sea of red when it comes to the emerging markets. China led the selloff, sparked with a slowdown in growth. The sloth forecast since the slowest forecast since 1990. It is the worlds biggest commander of grains and metals. Basic materials off by 2. 9 , oil and gas off by 3. 3 . Every Industry Group falling on the stock 600 stoxx 600. Copper trading off by 2. 4 . Brent, below 45 a barrel 43. 92. The global3 , glut is still playing into everyones mindset. Iran managing to push that. Dollar is where it is at, almost by almost off by almost. 8 . We reanalyze when we think the fed will hike rates. Comes todo it when it the markets, when everyone is worried about Global Growth . Theyve got commodities pushing down and raising the specter of deflation. Many in the market field we might delay to december. September, fed fund futures show left off in september, 28 chance. Weeks ago it was 50 . Recalibrating and that helps other currencies despite higher, euro up by. 7 . I leave you with the flight to safety happening in bond markets. Borrowing costs coming down for u. S. Treasuries. Greece still on the agenda, up 11 basis points. Debt coming out of greek as they worry about instability. Kong. Ne lets go to hong what is driving the selloff in asia. Seems to be in a panic. Good morning. It is all about china. We have two key triggers. Fears about chinas slowing economy and a rush of capital leaving the region. The nearterm trigger seems to be the pmi index at the end of last week, one of the few highfrequency ratings on the economy in august. That has sent a Ripple Effect across the region. People are worried that a slowdown is going to be worse than anticipated. Bloombergs gdp indicator is 6. 6 . Quite a long way from 7 . China is what drives the exporting base around asia. Commodities and all the other intermediate materials. The slowdown in china and fears of capital outflows is what is driving the share selloff in the rest of the region. Manus what kind of policy response from the Central Banks or government do you think were going to see . Seeing the possibility of Pension Funds being allowed to get involved. You get the feeling that the chinese are throwing the kitchen sink out. But they have got more. Enda throwing the kitchen sink yes, they do have a lot more. The central bank has conventional Monetary Policy. They can cut Interest Rates, they can cut what is called the required ratio, requiring banks to lend more. The government has physical firepower as well. Can have the pensions that now buy stocks and they can take other measures to shore up stock prices. China has a lot of a munition but it has not gained much traction. Around the region, of Central Banks, two have room to move if they need to. One thing we are going to watch is essential banks and the rest theira moving to support currency. India said they would support their currency if needed. South korea has said they would support their markets if needed. China and the rest of the banks in asia have room to move if they need to. Francine thank you so much. Bloombergs chief asia economics correspondent. Manus to germany, the dax is heading towards a bear market. Hans nichols is in berlin. Bring us up to speed. This is a fairly agnostic selloff. Hans down across the board. Dax was down 2. 5 last time i checked. Volumes are up, this is not light summers trading. I looked at the threemonth average, 174 in terms of a threemonth average. Youve seen that be the story for six or seven days. Especially at the end of days, volume spiking up. Seventh day of decline, that comes close to the record, in november 2011, which was nine Straight Days of decline. It is bad across the board. Take a look at some auto mler, bmw, dai volkswagen all in negative territory. Own. Ave the utility rwe d it really looks to be across the board. Even the bestperforming stock, henkel, Consumer Products manufacturing company, they are down 1 . Negative across the board. We will see what volumes do throughout the day. An important part of the story. Francine hans nichols in berlin kongnda curran in. Hong todays twitter question, where do you put the money . Manus my best response has been mattress asset management. Of hermes the head equities. Is the worst past . Talking about how across the board be selloff has been. Of what weve seen in the last few months has been a recalibration of expectations. At the beginning of the year, everybody was optimistic about growth. To what wet stack up were seeing on the ground. Everybody was typhoon about the dax was going to power to new hi ghs led by export growth. External demand in the emerging world is slowing. The euro has fallen in value, but so have other currencies. Theres a missing element, where was the demand . Europes story has been a domestic recovery. Francine you have qe in europe. You talk about a recalibration of expectations, we knew that china was slowing. We knew the numbers were to be taken with salt. What happened at the last 4 days . Andrew it is sort of a waking up. There is of money chasing returns. Earlieras on your show in the year you were saying arent equities expensive . They were. There was a colts between the implied profit and level of profits in there was a gulf between implied profit and 11 of profit coming through. Global growth is slowing. World trade has been slowing for many years, this is the fifth year that global gdp growth rate has declined. I would expect it to decline again next year. A lot of people have chased equities on the back of qe, put it under the mattress or put it into equities. Now they are being confronted, theres not enough growth across the board to support those heady valuations. Lets look at the upside, Commodity Prices are lower. Equity valuations have come a long way. Three months ago we were talking about a bond rout. Here they are back to near lows. And it is august, a time when confidence is very fragile, febr ile markets. Instead of dwelling on the negatives at the moment, i would for opportunities to selectively purchase as we go into september when normally some sense prevails. Manus where do you think the big opportunities are . We saw an article, the fab five in technology lost money, miners are getting trounced. Andrew weve always said follow the growth. Weve never believed we are in a normal economic environment. Where and a competitive world where there are limited sources of growth. Those companies can restructure to improve their return to shareholders. Those that are exposed to secular Growth Trends health cares, consumers are the ones we have been backing. On a day like this, everything goes down, this is capitulation. Find someen you can bargains. Things that are sold off inappropriately. Francine you think this is a bottom for certain european equities . Where do you find value . Andrew i would like to say the emerging markets francine that is brave. Fallingit is catching a knife, growth seems to be on a falling trajectory. In the eurozone, growth expectations are being raised, despite greece, despite china. Exports are the weak link in that. If you look at europe and the eurozone theres a domestic recovery. As long as confidence does not get broken or take a nosedive, there is selective opportunities in europe. Buying on red is normally a better thing than chasing the green. [laughter] francine thank you. Andrew parry of Hermes Investment management. Manus what else is on our radar brent crude slid 45 a barrel for the First Time Since march 2009. Iran said it would expand output to defend its market shares. A price drop extends the fall of more than 7 last week. Francine the south korean President Park geunhye has called on north korea to apologize over what he calls evocations that led to an exchange of provocations that led to an exchange of fire over the border. Kim jongun has stepped up the mobilization of his forces, doubling the number of frontline units and ordering most of his manus turkey heading for elections for the second time in less than six months after parties missed the deadline to form a coalition. Voting will take place november 1. Political wrangling accompanied by a month of escalated clashes with kurdish militants in the countrys southeast and the wave of violence spilling over from the war in syria. Francine this week is likely to see the start of greeces election campaign. A group of rebel syriza lawmakers will get first shot at forming a government a few days after creating a political party. Head tore expected to the ballot box in september. Us paolo how lo how low can oil go . Straight after the break. Francine lock into the pulse, live from london. Manus the bloomberg Commodity Index has slumped to the lowest levels since 1999, joining a route a rout. Francine brent below 45 a barrel. Andrew parry is still with us. Extremely difficult to call the bottom in this market. You say find value. What is your take on oil . It could go to 20, 30, do you stay away from every commodities stock . Andrew we are missing an important element in the commodity complex, that is the withdrawal of production. We are seeing no shuttering of mines, no closure of oil wells. This is part of the qe world we live in. When Interest Rates are low, companies can afford to keep production running for longer. A lot of companies are hedged. When those hedges roll off, there cash flows will take a hit. Im not going to go anywhere near the commodity related companies until we see consolidation and capitulation and that has been missing. They are still paying their dividends, still keeping mines you need that production to be withdrawn because supply is abundant. Manus you would say that the oil majors,he glencore, bhp billiton, it is still nowhere near enough. Enough, mynot question would be what is capitulation, what does it look like. 5 lower . When a few more highly youed players go bust mentioned that commodities were at their lowest levels. That was at the end of a 25 year there market. Snapback. Heres a unless Global Growth picks up demand pickssupply up. Until we get some significant changes, we want to be wary for an asset that produces no income. Does that mean you are expecting a hard landing in china . We talk about a supply glut but if you are seeing a chinese economy falling off a cliff, that would explain weakness in Commodity Prices and that might stay with us for four or five years. Andrew did anyone really believe that china was growing at 7. 1 per annum . When i visited china, everyone was talking about point 4. 5 and was anticipating the ben would beat revalue. Devalued. It was not that long ago that some forecasters were saying 12 per year. The chinese, we are coming to the end of a fiveyear plan. Theres a big restructuring going on. Making big extrapolations from the current data could be misleading. Francine thank you so much. Andrew perry, head of equities at Hermes Investment management. Manus the global selloff deepens. The latest from the london Trading Floor. Stay with us. Manus welcome back to bloomberg and the pulse. Live on tv and streaming on bloomberg. Com. A bloody day in equity markets. European stocks tumbling. German dax heading towards a bear market as chinese stocks suffered their worst selloff since 2007. Lets get to the Trading Floor in london. Great to have you with us. Give us a sense of what the clients perspective is. Are they reducing positions to cover margin calls . Other being stopped out . Is there a momentum behind his drops . I think we see a bit of both. Obviously, with the big fall overnight weve had a few margin calls. People are trying to take s in thee of the dip german index. When we see you there is reaching new lower levels we are seeing buyers coming in in the hope we will see it bounce. There are people who believe we might see a little bit of upside. The markets have certainly taken a pounding today. Buying it is going, the is going to slow down as people realize we might be stuck at these levels. Say we may see an upswing, our people stock picking . How do you look at the valuations right now . People are trading the swing on the index, certainly in the german market. Weve seen that pretty volatile over the last two or three months. Even though we are below the 10,000 level we are still seeing decent moves. People having to come in quickly and make a little bit of a profit. Manus you see a little bit of move, the euro is being seen as a haven. Any individual flows on the fx side . Mark who would have thought the euro would be seen as a safe haven . We are seeing a decent amount of buying of the euro. That is reflected by the level, around the 1. 15 level, which we have not seen for a month and a half. Theres decent volume going into the euro. A couple of months ago, we would have never expected that. Francine thank you so much. Coming up on the pulse, the front runner for the labour leadership garners support from dozens of economists. Manus a former bank of england visor who is among the publicity saying the candidates policies are not extreme. Dannyne we speak to blandflower. Follow us on twitter, i am flacqua. Where would you put your money among the rout . Euro, yen. Yen. euro, francine welcome back to the pulse, live from london. Amam francine lacqua. Manus i manus cranny. This week is likely to see the start of greeces election campaign. A group of rebel syriza lawmakers will get an attempt to create a government after creating a new political party. With one key Player Technology agreement is unlikely, greeks are expected to be back francine at the ballot box in september. Brent francine manus francine brent crude low 45 a barrel as iran says it will expand market share. This follows a drop last week. Manus asian shares have seen their biggest drop since 2011. Emergingmarket currencies have dropped to the weakest levels on record. Commodity prices have fallen to a 16 year low. Francine lets check in on the markets. Every major stock market in asia in the red. Not much different in europe. Over the weekend, it was about the rate cut in china that did not materialize. Blanket red. 2 , in bearver market territory. Ftse 100 on a 10 day losing streak, the longest since 2003. The stoxx 600, European Equity august. K, down 11 for poised for the worst month since october 2008. Ridiculouseally lows. You factor the outlook for growth and you see movers in the ftse 100 reflecting that. Usually this shows you the three biggest gainers and decliners, no games. Off, bhpdown, anglo billiton a worse. When is it time to catch the falling knife . Not yet, it would be like catching a falling chainsaw. That is a reflection of where sentiment is. Growth outlook factored into the commodity markets, bloomberg Commodity Index at a 16 year low. Brent south of 45 a barrel since the for the First Time Since 2009. At the fx markets and they currencies leveraged to the highgrowth commodity story. The South African rand at a record low against the dollar. Emergingmarket currencies, equities, last week on repeat this monday morning. Francine not much is not whacked. Economists have signed a letter supporting the policies of labour leadership contender Jeremy Corbin saying they are not extreme. Analyst believes they are mainstream. Great to have you. Corbyn clear, are you a supporter or are you just saying austerity is not going to work in this country . Thank you for the clarification. A corbyn supporter and do not share many of his views. What i share is the view that austerity has been a disaster. Nd harmful the big thing we argue is that opposition to austerity is. Ainstream economics the extreme is actually the practice government is doing. Ive just listened to jonathan talking about devastation across the markets. Austerity in these circumstances really looks out of place and out of time and harmful. Manus good morning. Danny what a day it is. Manus it is torture out there. Ist i want to know from you if austerity is not the right policy, how dangerous has the which been by osborne, the imf has been praiseworthy of. The most devastating thing that occurred was in 2010 when they slashed investment spending. Times if youn many compare this recovery and the economy was recovering nicely in 2010, then it flatlined. If we compare everett recovery in the past 300 years, this has been the slowest and worst recovery ever. Now it looks like the economy is at a turning point again. Gdp peres are down, head has not reached the level in 2008. Most of what weve seen is because we have a rising population. Iss look at the data, this the most incompetent government weve seen with the worst recovery since the black death of the south sea bubble. We are not prepared for the shock coming along. The economy has not rebalanced. Weve seen the aaa rating lost and gdp per head has not recovered. Lets put this in context. This has been a disaster. Economy is not ready for the shock that is coming. The Central Banks cannot cut Interest Rates. We are in a disastrous moment. Francine compared to the rest of europe, there is still Investor Confidence and unemployment is still pretty low. Lets move onto how you see china unfolding. The chancellor of the exchequer saying the u. K. Economy isnt vulnerable to International Stocks as we see a bloodbath in the equity markets. Think he will be putting less austerity measures in place . The move around the world for Interest Rates to rise has move back. Larry summers in the ft yesterday. Central banks and governments around the world trying to insulate their economies from the slowing world economy, especially slowing in china. The first thing you have to do one of two things. The fiscal authorities have to reverse austerity. Into thestment economy. Or the central bank has to cut rates. Here we are again, the potential that we are going to start new quantitative easing. Rbyn has as jeremy co said, investment oriented qe and not just buying government bonds. Manus do you think this rout, Global Market rout changes the dynamics for the Federal Reserve . Fed tos a window for the get off zero bounds and it is coming. Anny it changes it you would not want to be in a situation where you are raising ates it is only possibility the possibility is that we are in another significant downturn. As jonathan just said, we havent seen anything like this since 2008. We remember what happened then. Central bankers and policymakers have to understand you may be at a turning point, you often do know that you are. We are in a situation where the rate rises are off the table and maybe the next move is actually loosening. That moment is coming closer by the hour. Francine great to have you on the program. Danny blanchflower, former boe advisor, speaking to us on the phone. Now. to greece in the athens capital, the , snapation of tsipras elections expected to be called soon. Parties from all over the political spectrum are lining up to get their opportunity to form a government. Lets join Tom Mackenzie in athens. Give us a little bit of the to form who is clawing a government at the moment . The state of play is this, at 1 00 local time in about 20 minutes Popular Unity, europes newest antiausterity party formed by rebel members of syriza will be given a mandate by the greek president to try to form a government. This comes after new democracy failed to do that after three days. Get threeity will days but they are, it is almost certain they will not be able to form a government. They could use the three days to publicize their movement and reach out to other leftist groups. It gets down to thursday, that is when they are likely to put their hands up and say we have not done it. The president of greece will likely dissolve parliament and install an interim government. That is when the official election campaigning is likely to get started in greece, thursday or friday. Francine i always thought approvalipras had huge ratings. Is it likely that he gets a majority of some sort . Is it likely that he stays in power . Milliondollare question. Yes, he has come in the latest polls, the strongest popularity among the leaders. Relativelyseen as a young leader untouched by corruption and he has a lot going for him in that sense. There is despondency among some population the greek when it comes to the about turn he did when signing up for this bailout. That is why Popular Unity thinks they will be able to harvest some of that support. The creditors want a strong mandate to push through the performance in october ahead of a crucial review. Get a strongt mandate, if he does not get , then the other small party and other young parties, is he going to look to them for a partnership . Those are all things in play. Popularity is something he is relying on. Spend the weekend with a number of political, more radical parties. What was it like . A very interesting weekend. We spent a bit of time with Popular Unity. They said they want a restructuring of the economy. We spent time with the youth party, theyve got a lot of work to do. Are convinced they can get double figures, 10 percent, 11 geared we spent time with the far right party golden dawn. Heres the kind of things we saw when they invited us to their headquarters in athens. [chanting] this was the mood in the headquarters of greeces far right Golden Dawn Party saturday night. We were given where access as the members prepare for what is expected to be another greek election in september. Said angerdawn mp coupled with greeces migration crisis would boost support. They are going to vote us because they are angry with someone else. They are going to vote us because they heard us speaking in the parliament. They see us, they know us. They know that we are not going to betray them. Like tsipras and others did in the past. Tom he said the party draws support from a wide base. Despite leadership facing criminal charges in an ongoing investigation. Popular inxtremely new voters. We are going to be even more popular in the agricultural farmers. We are seeing a lot of votes from members of the army, navy, air force, police, fire department, coast guard whoever is dealing with criminals. Tom golden dawn, which won is accusednuary, of having nazi links, charges they denied. We are not nazis, we are greek nationalists. Tom he said golden dawn members would be out during the campaign, particularly in areas with large immigrant populations. We are going to be out on the streets. That is what we know best of all. Tom should migrants feel threatened . Why . Byrants should feel afraid the ones that are taken advantage of them, like the syriza government. Asking them to come from syria to greece. See how they live . They have to be afraid of them, not us. Town, the youth wing of Popular Unity, formed by former syriza members, gathered at an outdoor bar. It was the end of their first day as greeces thirdlargest party, determined to up and greeces. Latest bailout deal. Germany and the european Union Commission is doing our job for us. From the support they gifted tsipras. They also said to the greek needs newipras memorandums. No future. A new era in greek politics. Have struggled but the solution is in front of us. Tom Tom Mackenzie in athens for bloomberg. Tom that is the Youth Movement of the Popular Unity party. They said they are going to fight to make sure the third ballot is not implemented, talking about sit ins and street protests. Golden dawn told us off camera they are planning to go to some of greeces Southern Islands to try to capitalize on problems with immigrants. That is going to cause a lot of concerns for many people. So much, tomnk you mackenzie in athens. Next, emerging market currencies are taking a beating come along with equities. , down from 5 g and heading for the biggest drop in four years. Depreciating 2. 5 . Francine welcome back to the pulse, live from london. Emergingmarket currencies at the weakest levels on record following a drop in asian shares. Bloomberg spoke with the nations Prime Minister, who says other Oil Producing nations will not be far behind. Will be a learning experience for other countries for inflationment targets. If reach the goal is there a freeflowing economy. I strongly believe that the central bank should follow this direction. Francine lets bring in bloomberg strategist mark. How far will be selloff go . It is partly an oil story and partly a panic story. Mark we are in the middle of capitulation, currencies are indiscriminately. It will be painful but at some point the valuations start looking stretched and investors will look for opportunities. The places where it will continue will be oil exporters. Manus one of those major currencies, we were just chatting about it, the ruble. It is moved considerably, down 15 against the dollar this year. Do we expect further declines . It is hard for anyone to call the bottom of the oil market. Deep russia is in a recession, probably set for year on year growth close to 3. 5 . Terms, ruble is still looking strong. That is important for the government. We saw the Prime Minister encourage exporters to sell hard to support the ruble. All that will do is slow to move down. 71. 08. E dollarruble at is a psychological level. Mark the year to date highest 71. 84, hit in january. I see that being tested soon. The move has been so quick in the last few weeks, it is not so much technicals, this is panic. We will see a bottom in oil. Manus we have got to draw a distinction, you have commoditybased currencies, the aussie, the ruble, linked to the commodity rout. It is economic contagion, vietnam has already moved. Do we expect action from Asian Central bankers . You need tos where differentiate. For some asian economies, this move is unwarranted. I understand he china scare, you have india with strong growth. Small trade links to china. It imports more from china bennett exports. In the is a good story and has sold off, that should strengthened. South korea has strong trade links to china, they are going to be affected. Oil exporters like malaysia has domestic issues as well. You need to differentiate, some of them will provide opportunities soon. Francine india seems to be more resilient. Anyone else . Most india should be the resilient. Everything has been hit. The philippines is another one, growth of around 6 and a big current account surplus. It is a commodity and poor as well. Manus looking at saudi arabia, the market is under pressure, dubai under pressure. A great article written that the saudi peg could come under pressure. They have a fiscal deficit of 20 and their issuing bonds. Is that great journalism or a reality . Mark i think the journalism aspect plays a part in that. Im not sure that saudi arabia are going to leave the peg any time soon. We might need to see Oil Prices Lower before that becomes an issue. They see greater benefits than negatives for a long time. They still have reserves of 670 billion and they can afford oil at 40 for many years. They are not under immediate pressure. Francine thank you so much. Manus here are some of our top headlines at this time. Chinas second industrial blast in 10 days has left one person dead and several more injured. Ruxtonoyee of shandong Chemical Company was killed when a fire at a plant caused an explosion. The latest disaster came as the number of People Killed in the tianjin blast reached 121. 7 firefighters along with seven Police Officers among them. Dozens more injured. Francine shares sunk after the company confirmed its production line in china will stay closed for two more weeks because of the explosions in tianjin. Toyota says operations will only resume when it can confirm the safety of employees and the surrounding area. The blast destroyed over 5000 toyota vehicles. Toll from theth u. K. Are crash could reach 20. The disaster happened saturday when a fighter jet taking part in an aerial display crashed into a road in southern england. The u. K. s accident Investigation Bureau is currently looking into the incident. Francine for and look at what we are watching, we are joined by hans nichols in berlin. No doubt there will be some reaction in the states about the bloodbath we are seeing the cross markets. Hans is this going to continue in the states . Across the board when north american and south american indices open . What pressure will this put on the Federal Reserve with the september decision. Mandate,s in there price stability and unemployment. One thing i want to look at is the strength of the dollar. Sort of a wall street measure. Shows the dollar weakening a little bit. You use the measure and some great recording from my colleague andrea wong, take a look at what the fed uses for their dollar index, more currencies in the basket. Dollar doing nothing but strengthening. What does a stronger dollar do . Downward pressure on inflation. Making it less likely you get close to the 2 inflation target. That means the push off rate increase into next year could not be september. That is speculation on my part. We should take a look at the chart that andrea put together. It really doesnt show the divergence between the market view of the dollar and what the fed it really does show the divergence between the market view of the dollar and what the fed uses. Weve seen the wall street announces weaken can throughout the day. Manus very strong opinions on what happens next from the fed. Down to a rating of 28 say the fed will hike in september. Francine 52 saying december. That is it for the pulse, stay tuned for surveillance. It is all about the market rout. This is a great place to work. Not because they have yoga meetings and a juice bar. Because theyre getting comcast business internet. Comcast business offers convenient installation appointments that work around your schedule. And it takes done. About an hour. Get reliable internet thats up to five times faster than dsl from the phone company. Call 8005016000 to switch today. Perks are nice. But the best thing you can give your business is comcast business. Comcast business. Built for business. This is bloomberg surveillance. Brendan the supply story returns to demand as brent crude drops below 45 per barrel since 2009. The data dependent fed has new data that has traders increasing their bet that janet yellen will wait. Bloomberging, this is surveillance. , monday, august 24. Michael mckee is with us. I saw him in the elevator all packed for jackson hole. Michael the only thing we need to fear is fear itself. We dont know what is driving this route. Do people come back and buy on the dip as they have done throughout this bull market . Thedan we thought conversation at jackson hole would be how to create inflation and the conversation looks like how to avoid disasters