Transcripts For BLOOMBERG Countdown 20150904

Anna we are going to talk about the job market numbers printed with recap the market yesterday. Guy we went from being very happy about a very dovish to worrying about todays payroll number. Anna 217,000 is the number people will be looking for. It has gone from that crucial to beingof data something the economists are saying is backward looking. Think it is around 220, that is the number we are going for. Isay the question on twitter , what is your guess on todays nonfarm payroll number . We actually have a function on the terminal that tracks these. We talked about the rally yesterday. It looks better. Let me show you where we are on the fair value regulation calculation. Dow is down. I will give you an update at 7 00 london time. Interesting breaking news coming through this morning on space. , chemical they agreed to an asset swap. This deal was going to be announced in december of last year, it fell apart. It was about the souring relations between russia and the u. S. As well as direct fallout from the ukraine fred this deal got pulled fred this deal that pulled fred anna it seems as if this deal is back on the table. We will get more details further. We have plenty of interviews coming. Guy via morning a busy morning. We have some great guests. We are going to the g20. We will speak to luxembourgs finance minister, will talk to him about china, about what is happening in the wider world and how that relates to the fed rates. Anna we will have a couple of guests from italy. We have Jacob Frenkel of j. P. Morgan chase and we will also. Ave Nouriel Roubini they will weigh in on what the fed should do and when. Guy with respect to turkey, having a conference on the shores of lake como wins it. Enjoying the italian lakes today. Mainland markets remain close today. Closed today. They closed for a second day because of the commemorations of the end of these Second World War the Second World War. Open, perhapss some investors which they were not. Wish they were not. It is being supported by a pickup in a number of commodity somes, we have seen picking up. China is closed for another session, but the market here in hong kong opened after its oneday public holiday. Index aise visiting mainland shares owned by foreigners and institutions has resumed. It has slumped by 2. 6 . It is now down 14 out of the past 15 sessions. We have a raising yen in japan, it is weighing in on the overall nikkei which is down 2 . This is the picture of the asiapacific benchmark ridge index. You can see in late trade, every sector is lower, even oil and gas. It is down 1. 4 . We are seeing telco heavily sold off. Number of japanese Shipbuilding Companies are coming under question. Here are some of the major lacquers laggers. Toyota in japan, softbank, and mitsubishi, all falling. There is a little bit of support in the region, as i mentioned the minors and australia, also Samsung Electronics in korea is doing well. Offrally it is risk sentiment because asian investors are awaiting that payroll number coming through friday. Theyre taking the pause with china closed for a second day. Guy thank you very much. Everyone is waiting for the payrolls. Toa payrolls are likely reflect a continued recovery in the labor market with the Unemployment Rates near sevenyear lows. There is one thing youll not see reflected in the numbers, that is the market turmoil caused by chinas devaluing. People around washington will be shutting down for the Holiday Weekend on friday, but at least one piece of news will grab everyone possible tension, the august payroll report, the Labor Department will mark the last piece of news before the september policy meeting. The numbers are considered pivotal as the open Market Committee content considers to raise Interest Rates for the First Time Since 2006 economist are looking at a number slightly above the average job number gained this year. Policymakers are weighing in on the next economic picture mixed economic picture. Broiledarkets have been by the uncertainty in chinas economy. The Payroll Survey covered the week before stocks plunged so there is expected to be a little effect of the recent turmoil in fridays report. Notable increase in wage growth has the potential to play a role in the decisions made at the Federal Reserve in just two weeks. Guy lets go back to europe, talking about the job market, there was some concern recently, continuing that spains job market has hit a peak. The employment number rose in august, the first time in six months as a result of which, we decided it was a good idea defense Francine Lacqua to sit down with the spanish economy minister lorenzo bini smaghi. Francine are you apprehensive about a hike . Know, this is something that could destroy market participants. I think the hike has been announced, i think a long time that the decision is taken, it will create volatility. Something that we have to understand, we have to normalize the situation. Ready . E are the markets i know we have difficulties, we have is relevant ample liquidity on the markets, but we tend not to get used to sit on both sides. It comes from different variables. Francine the markets understand that . Sometimes they react. That we have to normalize the situation. I think in terms of medication, the fed is doing a good job. Perfectly what the volatility means for markets and for the real economy. At the end of the day there is a reality. The fact that the inflation rate is low. You cannot live forever in a world of zero Interest Rates. He was speaking to Francine Lacqua. Anna lets to you what is coming up. China slowdown, a possible said rate hike and trouble in emerging markets. A busy agenda. We will tell you everything you businessesw, various finding a packed pact. We will take a short break. Guy it is 6 14 in london. Here are the stories you need to know. Anna United States nonfarm payrolls come out today would be forecast pointing towards 217,000. The Unemployment Rate is expected to decline to 5. 2 . Investors will be watching the figures closely, because it is the final payroll jobs report before the Federal Reserve september meeting. Guy they are considering cutting more jobs which will affect staff in italy, germany, and austria. Unicredit is currently revising their Business Plan on the expectation that low Interest Rates will continue to hurt profitability. Warsthe latest star movie will not hit theaters for a wild, but disney has already started selling figures. One of the most soughtafter toys is the 150 bb eight ball shaped robot which is controlled by a mobile phone. Guy that is on the christmas list. Market was and u. S. Interest rates are on the agenda when the g20 meets. Ryan chilcote is there. What will we hear about . Ryan maybe. If you think about this, the g20 is a forum to a certain extent to emerging market policymakers. This is an important time for them come on the one hand they are concerned about the United States, the prospect of rising rates in the u. S. , none of them will be cheering for a particularly strong job report. We have our hands on the Draft Committee k last night, there is not a subtle reference to the United States there, they need to communicate the policy with other countries from the u. S. That is an issue, the other issue is the china and slowing economy. You think about the emerging markets, they have been the engines of Global Growth, you look at investors and they have soured on them. You look at the emerging markets index it is down to 20 . Fitting that this is in turkey, smack between the United States and china. You look at the lira, way down since the beginning of the year. The fact they will have an election in november, some of that is in the strength of the dollar and the expectation amongst investors that there will be tightening. We are in a risk off. Period. Off anna we might hear about chinese volatility. We may get a warning to be fed to be careful on Interest Rate. What else . Ryan lets not forget there will be 40 people, not including the imf. Half of those 40 are politicians , they are finance ministers, they can really talk about whatever they want, particularly at risk getting currency right now in the news. We all know that its migration, you heard the prime minister, the president of turkey yesterday in a speech blaming europe for the migration problem. Saying that europe and the European Union is responsible for every death in the middle east. He spent 15 minutes on the topic. I know the finance ministers will talk about that, if not in the communique, but in the corridors that will get attention. Definitely Pay Attention to that issue. Well discuss that with the australian treasurer, and also the finance minister of luxembourg. Both of those interviews are coming up in the 7 00 hour. That the in mind communique is something that all of the countries bring their own pet peeves to. Some people on the plane were talking about how they want to see the eu forgive greeces debt. Are they going to push to get that into the communique . Will the chinese complain about the u. S. . Will the u. S. Complain about the u. N. Devaluation . We do know they work through the night, i saw exhausted finance ministers this morning. They still have one night to go, it will go through saturday. Many of the ministers have not even showed up. I can promise you the best coverage. Check out this room, it is 8 00 in the morning in turkey. It is there are well over 100 seats, six journalists, and every single one works for bloomberg. Stay here, as the story develops, we will bring it to you. Back to you. Anna thank you very much. Crying out for a little time lapse photography. Talking yesterday yesterday about the migration crisis, lets say without. Shocking lets stay with that. Shocking images. European leaders are reconsidering policies. Prime minister David Cameron under pressure within the britain, european allies putting the u. K. Under pressure. We are expecting that written will can except thousands more. Thousands more. I guess the pictures on the front pages of small children on beaches, changing the narrative, certainly here in the u. K. Hans political leaders across europe are digesting these pictures, looking at the public response, and are starting to formula a response. They tweak it ever so slightly. We do not have specifics, but as David Cameron said yesterday, countries have a moral obligation to the people. Britain is a moral nation, and we will still our moral response abilities. That is why ice sent to be navy to the mediterranean and saved lives. Much of our aid goes to north africa and the middle east. Why britain is the second biggest bilateral donor in the world to those syrian refugee camps. That is why yes, we are taking thousands of syrian refugees, we will continue to. We keep that under review. Ehouse said yesterday, there is not a solution that is simple. We need a conference of solution. Numbers, they need of how many refugees are jumping over the all of the place. Yesterday the European Council president talked about the need for a hundred thousand. Reportingial times is the European Commission president is talking about 160,000. Just to give you guys a sense of how quickly this is moving, in june july, the eu could not agree to a 40,000 limit, now we are talking about increasing that by four times. It is clear a lot of countries will need some sort of a settlement program. This was merkels argument. Take a look at some of the resettlement figures about applicants to countries like germany. 188,000, italy down to 30,000, the u. K. , 11, greece, 6000. Victor or bought are very critical of the entire process. He said it was a german problem, not a European Union. As long as you have an eastwest divide, it will be difficult to get a solution. Unless countries like the u. K. , germany, and france decide to roll those countries in the eastern part, that will be dicey. We are in the beginning of a long, difficult process. Anna thank you very much. Guy an increasingly emotive story. I want to shift years, lets talk about what happened yesterday in frank for it at the ecb frankfurt at the ecb. They had sliding Commodity Prices, rather than confidently addicting a gradual rise in wth and inflation the ecb that was the plan. Acknowledged the outlook has deteriorated. Based on our Economic Analysis some of governing council decided to keep the key ecb Interest Rates unchanged. 2015, theith june projections, the outlook for real gdp growth has been revised down. We expect the economic recovery to continue, albeit a somewhat weaker pace than earlier expected. Reflecting in particular this slowdown in emerging market economies which is weighing on Global Growth, and foreign demand for exports. The council wanted to emphasize in the discussion today its willingness to act, it is its readiness to act, and its capacity to act. Anna lets get more from our guest host, paul donovan. Rejoicing reducing growth forecast, is this the ecb just catching up with forecast already out there . Or is this a signal of a weaker environment . Paul on the forecast site it is catch up. We dont actually have a particularly weaker outlook, we dont have to jiggly weaker emerging market growth. China is not slowing down in a germanic way. We have had a lot of noise in the markets, that is a different issue. What we have had from mario draghi is a lot of spin. The language around what he is doing is clearly demonstrating his dovish credentials. I think that is the new information that cannot yesterday. It was not the Inflation Numbers or forecast numbers, these were no surprise. Anna he did not shy away from talking about china and market turmoil. Some would suggest bankers need to stay away from that shortterm movement. Paul i think it is the dovish style of his. He has to clutch to anything that supports that. Front, yoution cannot support that beyond schneck september, the data does not back it. If you will save the volatility of the Financial Markets and the uncertainty that is your one lifeline if youre going to be dovish. I think that is why he was leaping onto that. Guy why is the ecb concerned about the emerging market . Paul in part because the european economy is more open. When the United States is exposed to emerging market, it is primarily latin america are we have a different situation. Where we have a different situation. For europe and germany there is more exposure to domestic demand. I think the second thing is the domestic recovery in the United States is now very firmly established. We are at full employment, we have rising inflation pressures. We have a normalized Banking System. The eurozone is a long way behind that. It has a mediocre growth picture anyway because of structural problems. Learning that we are the fact that the Banking System is nowhere near as advanced as the u. S. Anna thank you. Guy coming up, Francine Lacqua is that down with spains economy minister. More on what he had to say about the china slowdown, up after the break. Anna welcome back, youre watching countdown. U. S. Nonfarm payrolls for august come out today with bloomberg forecast pointing towards 270,000. The Unemployment Rate is expected to decline to 5. 2 . Reporthe final payroll for the before the september meeting. Consideringdit is putting an additional 10,000 jobs which would affect italy, germany, and austria, that is according to two sources. They are revising their Business Plan on next rotations that low Interest Rates will continue to hurt and ability in coming years. Founder isibaba planning to raise more than 2 billion for a loan pledge against the company stock, just one year after that recordbreaking ipo. The money raised may be used to fund capital. 6 31 in london, politicians around europe are monitoring the situation in china. In a bloomberg exclusive, Francine Lacqua book to spains economy minister about how the economy is exposed to these winds of change. Francine investors are nervous about the 220. I am not sure what they are nervous about is a china . Is it because they will think that will china will fall off a cliff . Howdy perceive the world . I suppose the g20 will discuss in depth the situation and the difference drivers of growth. Different drivers of growth. My impression is that Global Growth is mediocre, fragile. This always creates jitters in the markets. My perception about china is has been going off the main sources of growth globally. It is in a transition. It is in a transition towards a 5 erging area. It has to be sustainable over time. China will make its contribution. We will not see the impact of a 10 growth rate of the chinese economy. Francine 5 is not bad, were not talking about 3 growth, we are not talking about things that are very dark. You have to bear in mind this covers the action of the public powers. I think chinese authorities have taken the decision to interfere economy. He it is evidence in respect to the stock market and it will have an impact. Fax overoing to have a the affects over the rest of the emerging markets. Transformational amount of such an important economy. In the short term, markets overreact. Taking that in the mediumterm, that will be a positive for the world growth and world trade. Francine what does it mean for the spanish economy . I dont know what the impact is. When it spikes up and down it is difficult to read. We import different commodities. Instance, we have had or deriveding from from the declining oil prices in spain will account for more than 10 Million Euros. It will be felt in the balance of payment, it will have an impact on the inflation. It will also affect disposable income in households. For spain it is a gain, gain situation, the declining oil prices. I think this will affect the acceleration of spanish growth. Respect, our exposure to china is not relevant because our exports account for less than 2 of the total volume of spanish exports. Wider. E to look the slowdown of the chinese economy will have slower affects on emerging markets. , but that would be part of the slowdown of the chinese economy. With respect to commodities, i think the impact will be positive. I think it is something we have started to feel in terms of growth. Francine lacqua talking to the spanish economy minister. Lets go to charles in madrid. Madride is looking at and figuring our they go next where they go next. The exposure to china is interesting. He you work us through what thinks his exposure is and what that means for the spanish economy . Charles the minister said in the interview that the direct exposure of spain to china is limited. China has its own trade partner for spain. He mentioned that 2 of exports, what he was saying was there could be an effect on spain, indirectly through the impact of a chinese slowdown on spanish trading partners, especially latin america. We know that Spanish Companies are heavily invested in latin america, for brazil. Many large spanish investment in latin america. Inis saying that slowdown latin america which is heavily linked to the chinese growth could have a wash back for spain. Anna thank you. Guy lets get paul donovan back into the conversation. Were discussing earlier on the differences between the american perception of the emerging markets, and how it affects their economy and the european perception. Mario draghi talked about this directly yesterday. When you look at europe and think about how an emerging market inflationary wave would watch over europe, how it how uneven is the impact . Paul it depends on what were talking about. China is a good example. That a we assuming chinese slowdown in growth is negative to commodity producers . It could be positive. How is that . The slowdown is because the Financial Sector will not be construed beating positively to gdp. Financial sector is not a big user of commodities. You end up with less of a slowdown in the commodity sector. The chinese then go back to tried and tested traditional methods to simulate stimulate growth. Then you will actually end up with commodity demand coming through. If china goes down a traditional stimulus route to mitigate the effects guy the rest of the world will also do that. Paul different economies will also be affected. It might become more positive for commodity exporters in latin america. It might have a different impact on parts of southeast asia. It is a complex picture. And a girl where you see the fed heading . Paul the first thing, the real problem we have is the quality of Economic Data has seem to have deteriorated. We are getting back revisions. No one knows what is going on. The second thing i think is if i look at the big picture, take a step back and look at the u. S. Economy, we should of had rate hikes in june. Are up,ation pressures growth pressures are up, labor markets in proving, if you have higher employment, you need higher rates. Having said that, market volatility is a concern for the fed. Were to get awe week number today, were not expecting it. We are 195 on the payrolls. It is not a huge amount below and in an economy like the United States, but when we look at the isn survey it was a little below. We are also saying look at the back month revisions. They keep adding to that. The market is always steered by you guys to look at the headline number. You need to tell people to look at the back revisions. Guy what are those . Adding 20,have been 30, 40,000 to the payrolls on a net basis. We are continually getting this creep higher in terms of unemployment numbers. What we are seeing the last few months is when the number comes in below consensus, throw in the revisions that you then get over the next two months. It comes back for economist said. Economists said it would be. What are the back revisions plus the headline number together . Take a big picture. Anna that would be complicated. Inflation inequality in the United States, you mentioned how there are inflation pressures building in the u. S. Despite inflation being at a low level. You think it is unequal. Paul it is a key issue, if we look at lower income jobs in the United States, their pay is not particular they going up. The pay increase is coming at a high income level. What is a matter . If you have a lot of why does that matter . If you have a lot of Service Sector with wage is not going up , if we look at food prices going up, you start to see more pressure is coming in on food Price Inflation what you have generally over the last 20 years is a situation where low income people consistently face a higher inflation rate than hiring people high income people. It is the hidden inequality issue. It is also the case that older people are facing higher inflation than younger. The bottom line is you need to be young and rich if at all possible. Anna ok. Thank you. Stay with us for more insights just like that. Guy would be commodity theme, we have heard from russia and german giant bss that they agreed to an asset swap. Richard is standing by in frankfurt with details. We thought this is off the table , what allow them to sign the deal . Richard first of all you may think, an asset swap with assets worth double digit billion euro marks . Assetsenue value of the they are giving away for parts of gas fields in siberia. You think a western company and russia, what is going on . We knew it was on hold, it was on hold, and was on hold because of political tensions. The companys had officially at the time admitted that, now its back on. Tohas opened the door essential deals between western and the u. S. , it remains to be seen. Said it has been cleared by the European Commission. It is a big deal. Isbegs one question, why basf giving away profitable business, gas trading you may think is lowmargin, highvolume business. If you look at the numbers provided, not so much. Assets has asome margin of about 21 . 12 billion in sales. Thanis actually higher basf overall profitability. The higher obvious answer from basf will be what they are getting in return, the gas in siberia, probably in the long run will mean higher profitability. You have to think about the around the corner. Overall people think basf they do not think oil and gas they are not a giant player, they are a big chemical maker. They need oil and gas as feedstock for them. Now theyre saying what they have been saying, gas trading actually is not so much are core competency, we need the supply and assets to produce our chemicals. We do not necessarily need to engage and gas trading. That is better with the russian hand five. Side. Anna thank you. Guy we will stay in germany after the break. Mark barton talks to a billionaire who singlehandedly trumps all of the fortunes of his local Football Club. Stay with us when we come back. I went it is 6 48 in london. Let me tell you about the stories you need to know about. Anna u. S. Nonfarm payroll numbers are released for the month of august. The bloomberg forecast points to a number of two under 17,000. 217,000. The final payroll report will be before the sector meeting. Unicredit is considering a 10,000 jobs which could affect staff in germany, italy, and austria. Unicredit is currently revising their Business Plan on expectations that low Interest Rates will continue to hurt profitability in the coming years. Anna basf and gas drum have agreed to complete their assets while. Will exit thepany gas treating business in return for stake in siberian gas fields. Almostnsaction approved two years ago, will be completed by the end of the year and the reprint retroactive to april the first 2015 2015. Guy this week we look at a sporting success. Our spotlight is on the billionaire who invested millions in his hometown the ballclub hometown Football Club. Mark barton caught up with him. He did not just go out and buy a trophy asset. He went out and supported his local team. Mark it is a lovely story. Hoffenheim, ar small village in the southwest of germany. We ventured to this small village in search of him. We spoke to football fans who had seen the rise of this football team. In 1990, this is a team a village team in the eighth division. By 2008 was in the fifth division. He was slowly putting bits of money and. He got serious in 2005 when he decided, i want my team, which by the way i played for, to be in the league. He put more and more into it, from 2000, they went to the top and 2008. In 2008. I can relate because i come from a small village, i cannot imagine in a million sundays my village team being in that division. It is a lovely story. The cofounder of sap. I asked him, what are you more proud of, cofounding the World Biggest Software Company or the rise of the Football Club . Sapbviously without hoffenheims promotion would not be possible. Without the success of sap i would not have been able to build this stunning golf club. It will host of the soap im month the month. Of course i am naturally more proud of what i have achieved with sap than everything else. How much would you say you have invested in the club . Have you taken any money out . It is hard to say of course. I have been supporting the club for joint five years now. 25 years now. I used to be an active footballer. I began the whole thing back in 1990 when i achieved success with sap, and also have the financial resources. Support itgan to modestly, however always with a view to support young people. Supporting youth activities for me was the be all and dont and all. And all. It is a modern infrastructure for young people. That we then have the idea to provide much greater support for the professional players. For the first time in 2005 we i decided toather try to get the professional players into the league, which we did. To answer your question specifically, for all of that, infrastructure, developing a team, also developing a team that manages the whole thing, a Management Team etc. , it is over 3 Million Euros 300 Million Euros. Mark is there a limit . Is there a figure whereby you simply stop spending money on your Football Club . Yes, it was never my intention to invest so much. Ofid not fit set limits 100 50 million, i must admit i never intended on 300 million. , andorts of things came up the end i actually needed to keep the club balanced. First week, i the made investments which were higher than expected. We have reached a point now where we, the club can stand on its own two feet. It is not dependent on me come a so therefore there is no real question of me investing more. You wake up one morning and you spend 350 Million Euros, what an amazing story. Isk do watch the special it 5 00 p. M. Saturday. An amazing story. If you grew up in a village like i did and if you are a soccer fan. Anna thank you very much. Guy plenty coming up over the weekend. Rugby i suspect, increasingly marks next focus. Lets take a look at some of the top stories on bloomberg. Com. European leaders are starting to change policies on excepting people at in their home countries. There is one region that is getting scrutiny for not absorbing as many refugees that is that the gcc. Anna tim coulter joins us now. A lot of pressure around the european side of the story. That is the focus. There is also this interesting conversation about why more of these people, all of these displaced people are not going to some gcc countries. Just, wein at interviewed to the danish finance minister who called its catalyst that places like saudi arabia are not accepting refugees. These are some of the richest countries in the world. Shared cultures, language, religion. Is some ofint choices being made by the refugees. Some of the refugees said they do not feel welcome going to places like qatar. Places like that are a delicate balance. Minority. Are a they are in fear that a big influx from other countries could disrupt it. Anna thank you very much. We will tweak to that story in a that story in a moment. Paul donovan is with us. We have the luxembourg finance minister coming up. Plenty of great interviews in the second hour. Usa the lasttaley report before the september meeting. Which country is a winner and the economy is shielded from the china slowdown. Anna leaders from the group of the imminent fed rate hike in deepening slowdown in china. Guy welcome to countodnw. Wn. anna lets review where we have been. Guy can i just say that we have some manufacturing data that has just come out, down 1. 4 from the previous month. We will get paul donovans reaction to that in just a moment. As i was saying, the u. S. Closed yesterday, but we saw the rally fading. It faded into the close yesterday over and the United States. It is going to be interesting to see how the markets open later on. The initial calls here in europe this morning are fairly bleak. Quite negative numbers are being posted by equity markets. I will show you in just a moment. Payrolls are going to be absolutely critical. The dow and s p down by a tense of 1 by 8 10 of 1 . The dax is down 1. 5 . The fair value column here, looks like we will get a fairly negative story. That draghi bounce we got yesterday which pushed the markets up, in this column here, you will see that being unwound. Anna that german manufacturing member is dropping 1. 4 worse than estimates. That will not play into any positive sentiments. The usa, the focus is on the jobs created in the month of august. 217,000 is the consensus number that bloomberg has, but a lot of people are raising questions as to whether this is just a little bit old. Survey numbers that went into this report would have been taken before we saw the high second half. Guy what is your guess for todays payroll number . Maybe we are looking at the wrong number. Maybe we need to be aggregating the revisions, taking more of a two months picture. Give us your number. Nfpguesses. Anna you can find us on twitter. We will have the luxembourg finance minister any moment now, just a few minutes time. We will talk to him about the g20 agenda and the ongoing conversation around migration in europe. Guy then we go to the shores of lake como. Chair, he is going to be joining us. He is the international chairman, coming to us from the shareores of lake como. Anna we go now to the g20 finance meeting. Among the agenda items is the slowdown in china, one nation that has taken a hit is the key trading partner in australia. Ryan . Ryan you could argue that australia and the australian economy is more dependent on china than any other economy in the world. To discuss that, we are joined by australias treasurer, the man in charge of the countrys finances. Your gdp numbers came out earlier in the week. Cordero quarter, the economy grew by 1 5 of 1 . A lot of economists say that is much worse than they were expecting. You said it is growing well. What are the economists missing . Joe they are missing the four years, and the more recent data which indicates that 70 of our economy, which cover services, has grown by 7. 5 in the last 12 months. Mining and resources represent only 10 of the australian economy. Agriculture is less than 5 . But they are obviously a big part of our exports. We are now seeing the emergence of a middle class in asia that has massive demand for our exports in education, tourism, advanced manufacturing. It represents 70 of our economy, 70 of our exports. Ryan you gave your forecast four months ago. Given what we have seen in china over the last few months, are you concerned you might have been a bit too optimistic, that you may need to revisit them . Joe no, we think our forecasts are about right. We are seeing pretty strong employment growth, even in the wake of us not getting our Economic Growth back to the trim growth rate. This is a new phenomenon in a number of different economies, the fact that we can have pretty strong employment growth despite not having normal levels. That is quite encouraging. Ryan what will it take to force you to change your budget forecast . What would have to happen . Joe it depends. There are many factors at play. China is our biggest trading partner, but the United States is our third biggest trading partner, and we are seeing strong growth in the United States. Low Energy Prices help us on the one hand because we import a lot of oil. On the other hand, we export a lot of gas. Thats not necessarily helpful to domestic gas prices. Australia has a diversified economy, much more diversified than people appreciate, therefore we will be able to cope with whatever happens in china, or more particularly in other parts of the world, so long as it is not a global phenomenon. Ryan persisted lower Energy Prices it would be reasonable to assume could force you to revisit the budget forecast, if you were to see that continue. Joe i dont see that again, we are seeing volumes to our exports continue to increase. For example, our oil exports to china continue to increase. Yesterday they made an announcement in relation to forecast increase in chinas demand. That is encouraging. Oil exports have seen some volatility because of domestic issues in china. Coal export volumes will, over time, hold up because we are a low cost producer of high quality coal. We are also seeing increases in soft commodities like beef. We will continue to increase demand out of the asian region. Againste aussie dollar the u. S. Dollar is down by 4 since china devalued its currency. What is fair value for your currency . Joe i will leave that to the market. A lot of our exporters have struggled when the Australian Dollar was near parity. Ryan are you concerned it is too weak . Joe i think as the head of our central bank, im not upset about the current level. We are very anxious not to comment on particular levels. Cope with a we can currency that continues support, because it is going to empower our exporters. Australia is always a beneficiary of better export processes. Ryan let me ask you about the migration crises. Your father came from palestine as a refugee, left in 1948. What is your take on the issue that is getting so much attention right now in the European Union . Joe it is a difficult issue in europe because you have two types of refugees. You have the ones who are coming across the border because there is a war nextdoor. 2. 5 millionwo and syrians have come across the border as a direct result of the conflict. You have a conflict in north africa, as well. You also have some economic refugees in china it coming across to europe as well. Australia has the economic refugee challenge. Before we came to the government, tens of thousands of refugees came on boats. We stopped the boats and we lost 1200 people. When we were elected into government we said you have to stop the boats. You have to close down the Business Model of people smuggling. And we did. Ryan the lesson for europe is what . That you should be tough, as australia has . Stopping migrants at sea, keeping them in camps outside australia . Joe your community will always be more generous to organize resettlement of refugees. It will be to people who jump on boats to come over. Having said that, there is no single solution in the case of europe, because there are many different factors driving the refugees into europe. There are many factors at play. Most particularly what is happening in syria and iran. Ryan thank you very much for your time. That was the australian treasurer, the finance minister, weighing in on migration, an issue close to heart for him, and also remaining pretty upbeat on the us trillion economy. Guy thank you very much. Ryan chilcote. Anna chinas mainland markets remain closed today for a second day, lets get out to Juliette Saly in hong kong where we are seeing interesting trading. Juliette we certainly are. Its interesting to note that we saw a spike in the aussie dollar coming through. Know, we havee seen that dollar hold today at the sixyear lows below 70 cents. It did well today it was the only one that we have seen higher. They closed up by 2 10 of 1 . The nikkei 225 is the worst performer in the region, down by more than 2 , because the yen is rising. Everyone is getting into safe haven assets, a lot of export stock weakness. The regional benchmark indexes on track to close lower for a seventh week. That is his longest losing streak since june, 2011. We still have china closed for a second session in hong kong came back online, down 7 10 of 1 . Investors are looking ahead to that u. S. Payrolls number and xious, and what will happen when china reopens on monday . A lot of speculation that they will stay backed. That is why we have seen quite a lot of nervousness in selling in the asian region today. Anna thank you. Monday could be a nervous one. China will be back trading. Thank you. Guy one place to be on monday morning watching countdown. Caroline hyde has the details. Caroline a bit of heaven a out there, and ipl action. With bwindeal party, about a tussle going on for the asset. Bwin is about online bingo into gaming in we understand that deal has been struck. Pay 129. 64 p per bwin party share. Basically, is 1. 1 billion pounds. That is beating the rival offer that came from 888, a premium of 12. 5 on bwin party share prices. It really has been ramping up, then this tussle for the asset. Finally, a deal being reached. Offer. Be a 25 p cash another quick bit of news this is a German Company that will be spending out a polymers unit, it will be done on the fourth quarter, an initial Share Offering depending on the Capital Market conditions. If things get to rock it could be put to the side, but overall they will be selling shares, the aim is to repay into company debts. Guy thank you very much. Anna lets get back to that exclusive sound we have for you. Francine lacqua spoke to spains economy minister. She spoke to him about the strength of the spanish economy and membership of the shared currency. She asked him what kind of rate he would be happy for the euro against the dollar. Francine give us a sense of the euro. How much of it is a worry if it continues going up . Level for youral dollar . Nowink that we are that the valley of the euro has reaching k we are francine 1. 15 would be fair value . Yes. We are seeing different performances in the World Economy 1. 15 for spain, we realize that there is an Exchange Rate that works. We are competitive. Markets inmes the case of commodities, ve the level of the Exchange Rate, i that is a fair value. The spanish economy minister talking about his economy. Lets talk about the German Economy new. Paul, we had some disappointing data at first blush, disappointing. You will tell me the distinctions are in the way we look at the data. Paul when we look at Something Like all the data, when you have currencies which are moving, you need to be a bit careful. If you are a german exporters selling in the United States, you are selling in dollars. The movements of the currency can reduce the value of your orders even though the volume, even guy selling a plane out of hamburg paul the same plane, but the order value, a nominal number, is coming down. If you look at gdp, we are interested in real things, not necessarily what the value of the planes is after the Foreign Exchange markets had a go at it. We need to be a little bit careful about this sort of data saying, that is universally bad. When we have currency moves anna thank you very much. Countdown,p on live to the g20 meeting. What luxembourgs finance minister has to say about Interest Rates, china, and greece, probably migration as well. Guy it is 7 19 in london. Good morning. Anna you are watching countdown. Lets talk about where we will head on this market. Guy australia is one of the few markets that held up, but what i want to show you is the states and in europe. Yesterday, a very strong balance, but this morning we called sharply off. This is the fair value calculations the terminal has for us. The u. S. Has found a little bit over the last half hour. Big bounces yesterday for the markets. In europe, the fate on the rally yesterday was more pronounced. Anna 7 20 in london. Are0 finance ministers meeting in anchor today. Among the agenda items is the greek debt crisis. Among the countries that acting third bailout was luxembourg. Ryan chilcote is joined by the countrys finance minister now. Ryan . Ton we are joined today discuss what he would like to get, first and foremost, out of this g20. What would you like to see here . The chair of the have a frankn here and open discussion because the times are difficult and there is a lot at stake. The most important thing in the g20 is that it is meant to be useful, so everyone expresses their opinion clearly and loudly and explains well. It is only if we understand each other that we can have a common strategy. Ryan what is it that the 40on central bankers need to be frank about . Pierre we have four major themes one is the likely increase of Interest Rates in the United States. The secret is that it is going to happen. Second, we have a policy of quantitive easing in europe. Has launched a couple months ago and we continue until next year. The European Central bank says it is ready to do whatever it takes. The next thing we have is the financial turmoils, lets call one thingn china, and that is not enough on the radar is the Commodity Prices, extremely low, and that poses lots of problems for emerging countries. I think these are the four cornerstones we have to discuss. Re, the biggest threat to the Global Economy right now is what . Pierre it is the combination of the four. It is not only set in those four issues there are opportunities that the increase of Interest Rates in the United States is only a negative measure. It has to be done we cannot live on a permanent basis with extremely low Interest Rates. We would have to reverse that tendency. It is the timing that is always a difficult issue. Ryan mario draghi expresses concern about china. What specifically worries you about china . Is at the market in the situation in the market, or is it the economic slowdown . Some people say that those two issues are not exactly linked. Pierre i think we have to subject here. The slowdown in china, in terms of the industry and manufacturing, has to be seen. China is still saying that they will have a growth of roughly 7 . The turbulence that we have seen on the Financial Markets has to be watched very carefully. Chinese authorities have tried to stabilize the situation, but it is very difficult to go against the market. Ryan is the euro area insulated from that . Pierre well, the euro area has gone through major difficult phases in the last couple months. Let me remind you that we found a solution to the greek crisis, which in my opinion has shown again that europe can handle Difficult Solutions in times of crisis. I think it has strengthened the credibility of the euro, and we have seen europe in the last couple months, maybe the last year, picking up in terms of growth, and that is good news in easing is helping good news and quantity of easing is helping. Ryan the United States is saying that they may push for relief of greek debt. Are we going to see a headline out of this meeting . The European Union saying we agree . Pierre in the compromise that was found with greece, it was said that we would have to agree on the 86 billion euro package, and in the aftermath we would be ready to discuss the issue of debt restructuring. It is on the table is going to happen. Ryan very divergent monetary policies between the united eurozone, the eu, the the ecb announcing yesterday more qe. Is the euro going to provide some extra impetus . I know we have seen in the last couple trading days the euro falling down 2 . Pierre of the put it this way we have known from the period of 2008 to recently where we had quantitive easing in the u. S. And not in the eurozone. Now quantitive easing has stopped in the u. S. , and started in europe, because we need it we need it to launch the economy. I think they are compatible. That wealso make sure have more growth in europe and more investment in europe, because that is what we have been lacking. Was starting to fill up also because we have the european strategic investment, which was launched last year. They will do their utmost to implement it. Ryan some take you we didnt work the first time around europe. What iswe think the argument that it will work this time . Pierre we have seen since march that the quantitive easing has provided enough liquidity, especially in those countries where credit was not available or not available in enough quantity, is now happening. Quantitive easing is reducing its affect. Ryan migration. I know this is an issue close to your heart. Explain to us, and to our audience, the Cost Component of the issue right now. We are all looking at the squabbling going on amongst eu countries, trying to understand the financial component. Pierre it is only one of the issues raised by this huge on the immigration, due to the fact that we have a terrible war going on in the gulf area. The cost is one component. We have to make sure in europe that we coordinate all our efforts in terms of defense, in terms of rescuing people, in terms of receiving this people. I think we should make sure in europe that when we see thousands of refugees which are i want to underline political and asylum refugees, not economic refugees they come for a long time. Make sure they are going to be integrated in societies and also in our economies. Ryan what is your value for the europe . What is fair value for the euro . Pierre that is impossible to define, you know . It changes all the time. Ryan and what is your message for the chinese in your discussions here . What would you like to tell them . Pierre they dont need to be told anything. Lets have a Good Exchange of views, lets understand what their motivations and what their strategy is. If we understand them better, we will understand them better. The finance minister of luxembourg joining us back to you. Guy thank you very much. Ryan chilcote joining us from the g20. Anna italys International Economic conference is currently underway. Leaders of the financial world are converging on the site of lake como to discuss challenges to the Global Economy. We go live now to the Financial Market for them, where we are joined by the jpmorgan chairman, jacob frankel. Good to have you on the program. Thank you for joining us. Lets start with your take on the broad macro picture we face right now. Have you contextualize the volatility we have seen in markets in august and into september . How much is that shifting your view of where the economy is . Well, i am the chairman of jpmorgan international, not jpmorgan. Be,Global Economy seems to especially lately in the United States, were covering. Recovering. There is no question that recovery in the u. S. Has taken hold. Labor markets have improved. Fall, and wey will are very close to normalization of the United States. Of course there are areas in the world that are not doing so well, especially submarkets with the decline of Commodity Prices. They have a big burden on them. By the same token, europe is still recovering, but somewhat at a slower pace than we have just heard. Is said and done, the Global Economy as a whole is recovering. There are areas that are slow, but the u. S. , which is the largest economy, is doing pretty well. China is a separate matter which we can discuss later. Guy lets discuss it now, mr. Frenkel. How much of the chinese authorities the stimulating their economies . Doing need to see some sort of a fiscal push coming through . How much more needs to be done, do you think, by beijing to stop the slowdown at we see batch we see . Jacob well, we need to realize that in china there are two major issues that are not exactly the same. Economy,e real the financial economy. The real economy is slowing. It reflects the fact that china has adopted a very, very ambitious transformation policy that changes the entire model of the economy from export led to domestic demand led. They are calling it the new normal a much higher share of services and the economy. In other words, we are going to see big changes. With all big changes, a slow down as their. Is there. They are and have been slowing down significantly. Investment has been slowing down. One of the reasons is that in the past we have had excessive investments. I would call what is happening a correction. It is not something that is going to last one year, it is something which is a multiyear process. We need to get used to the china that is not growing at 8 or 9 , but maybe growing at 6 . Anna and if that is the case carry on. How much stimulus should the government deliver . Well, the stimulus they need to deliver needs to be much more focused. It is not an economy wide stimulus, but into specific areas, what they would call acupuncture stimulus. Identify pressure points, where they need to be focused. But again, the issue in china now is not just macroeconomics, that can be solved by either monetary or fiscal policy. It is a structural change. They are still having huge organization programs, 50 of the population still live in the rural areas, which means this is a major future engine of growth. Frenkel, how many rate hikes do you think we will see over the next year . You talked in the past about the fact that you think the fed should get on with it. Look at the right path look like in your mind . Well, there is no question in my mind that once the fed starts hiking rates, it will be a journey. It will be very measured. A journey in which rates will rise slowly but consistently. The fed recognizes, like all markets recognize, that where we are now is not sustainable. Rates havet basically a downhill job, and it is now time to move on with normalization, because the real economy is now sufficiently robust to accommodate it. We would see a sequence of rate changes, and in my judgment, it will be viewed as good news, because it will reflect an assessment that the economy is sufficiently robust to come back to normalization. Everyone is talking about the costs of normalization. I think we should also recognize that there are a lot of costs of nonnormalization. The problems that come to the Financial Markets from a very long fear of success of the low Interest Rates. That is why the fed is eager to get out of it, provided the economy is strong enough. We were here today, the results of the labor market, and i think this is something to look for in to watch very carefully, because what is indicated by the fed their decision they are looking at growth, looking at price development, inflation has been handsdown superficially and maybe transitory by the decline in Commodity Prices, by the decline in significant drive llar, but those are not permanent fixtures that will hold inflation for long. Therefore in order to be ahead of the curve, they now look at labor markets that have shown significant improvement, and what you will see today is whether the improvement is sufficient or not. You mentioned the strength of the u. S. Dollar that the market anticipates. The dollar has strengthened, of dorse. What kind of damage you think that could cause the u. S. Economy . Jacob i dont believe that it will cause a significant damage. The u. S. Is very diversified. What we are talking about when we talk about hikes of Interest Rates they are so measured. Knowing thet United States, it will be generated by monetary policy. Monetary policy has done its job, but providing time and space and breathing space to other policy measures, especially structural policy measures. 25 basis points or so, he had give Interest Rate is not going to have any significant negative impact on the economy. It is really the beginning of normalization. Anna thank you so much for joining us. Mr. Frenkel, chairman of j. P. Morgan chase international. A. It is 7 36 in london, anna the u. S. Payroll numbers are released for august today, with bloombergs forecast pointing toward 217,000. The Unemployment Rate is expected to decline by 1 10 of a percent. Investors will be watching, because it is the final payrolls report before the Federal Reserves september 16 meeting. Guy the biggest bank is considering cutting another 10,000 positions, which would affect italy, germany, and austria, according to people with knowledge of the matter. It is revising its presses print on the x if Business Plan. Anna german factory orders fell more than expected in july, signaling that growth may be bumpy. Seasonaladjusted for swings and inflation jumped by 1. 4 , a bigger forecast than expected. Guy we are 20 minutes away from the start of the european trading. Let me tell you what we think the start of european trading is going to look like. We have a negative open price for europe. E, cac, and dax. Remember these markets were up sharply yesterday. The fair value story looks a bit more positive than when we first came in this morning. Remember, the u. S. Sess ion faded toward the back end of yesterday. Anna lets see what kind of handover we are getting. Lets get to Juliette Saly in hong kong. Juliette this graph shows you the sentiment in asia. En, and the dollary it is up by about half of 1 . What happens when we see investors flee into the yen . They are fleeing out of other asset groups and we are seeing investors bailout of equities today here in asia. The regional asian benchmark indexes losing ground for its seventh consecutive week, the longest losing streak since june, 2011, on track for its lowest weekly close since december, 2012. You can see pretty much every market open in the red. China still has a twoday public holiday. Oncall came back online in the hang seng fell by half of 1 . Ownedina mainland shares by Foreign Investors and institutions continued to fall, having one of its worst weekly losses in recent times. South korea is seeing big falls. In japan, the nikkei 225 closed down by more than 1. 2 . The only market that did well was one that did badly yesterday australia is up by a quarter of 1 . We saw the aussie dollar fall, the boost to some big mining and export companies, and base metals were high. Generally the mood in asia is quite dour. Investors are getting out of equities ahead of the u. S. Jobs number later today, also awaiting what will happen when china reopens after that today hold on the shanghai composite. Guy thank you very much. It, you case you missed can tell us what you think on twitter. Its job stay in the u. S. Payrolls are likely to continue to reflect the rebound with an Unemployment Rate near a sevenyear low. But theres one thing you wont see the market turmoil caught by chinas devaluing of its currency. Phil mattingly has the details. Phil people around washington will be shutting down for the Holiday Weekend, but at least one piece of news will grab everyones attention the august payrolls report. The Labor Department will mark it before the policy meeting. The numbers are considered pivotal as the fed considers whether to raise Interest Rates for the First Time Since 2006. Economists are calling for an advance of 220,000 jobs, according to a blu bloomberg survey. The number is considered increasingly important as policymakers way in a mixed economic picture. In the u. S. There have been a series of positive economic reports, most recently a growth number of 3. 7 . Still, Global Markets have been iniled by uncertainty chinas economy and deeper concerns that problems with the economy may still over. The Payroll Survey covered the week before stocks plunged so there is expected to be little effect from recent turmoil. Still, a big positive number or perhaps more importantly a notable increase in wage growth has the potential to play a role of the decisions made at the Federal Reserve in just two weeks. Back to you. Guy Phil Mattingly reporting. 7 41. Caroline hyde has her eyes on a few eyes you want to what if you stocks you want to watch. Caroline it will be generally a down day, we know that going in, but we could see a little pops for gbc and bwin. It seems as though bwin has changed its affections it is going to gvc 41. 1 billion pounds. For 1. 1 billion pounds. We can see how much it has been volatile as companies 9888 and gvc. This is a Smaller Company buying a giant company. Bwin will end up having 66 , two thirds of its company, a far bigger market valuation. Gvc is really going up for goliath. A bit of m a. Second, keep an eye on basf. In the gascting basf pump to fall about half a percentage point. Agreed to an asset swap. The worlds biggest Chemical Company and russias gas pam saw that asset swap. This is all about the Chemical Company getting into oil and gas exploration, getting out of gas trading. Is is something that was originally planned before the political turmoil that was instigated by ukraine. Anna thank you. Guy coming up on countdown, the cofounder and chairman of roubini live from the foreign markets shores. We will look at the payroll number, stay with us. Guy it is the 47 it is 7 47 in london. It 47 in frankfurt. Anna welcome back. The annual Global Economic conference in italy is taking place and across the weekend. We are joined live by the roubini cofounder and chairman. Great to see you on the program. Good to hear from you. We spoke just a few minutes ago to mr. Frenkel from jpmorgan international. He was talking about how he thinks the chinese economy probably needs to give more stimulus. Do you think the chinese need to do more, and what should they do . Well, china is an economic a soft landing and now there is a hard landing, the economy is in freefall. My view has been all along that it will be something short of a hard landing. The markets are becoming too pessimistic about the chinese Economic Growth and their ability to manage the growth slowdown. Do they need to do anymore . Nouriel there will be more policy action from china they need to do more to stabilize the economy, and they have to be more consistent in their economic policy. There is a movement away from key asset prices like the stock market in the currency, Interest Rates that may be market affirming but it is creating shortterm pain. Guy nuriel, when it comes to financial assets, if you had a bit of money to invest right now, what would you be buying and what would you be selling . Well, i believe that the volatility coming from china and the slowdown in emerging markets will stay with us for the next few months until destabilization of the growth rate in china, more credibility canr policy implies continue for a while. Then you may want to be slightly underweight, a risky asset like u. S. , go more into longterm government bonds, where we will see higher returns. Also stay away from emergingmarket assets and stay away from, for example, their currencies. Stay away from risky assets for the time being as volatility will continue for a while. For so if we are riskoff a while, where does that leave the decisionmaking process to the Federal Reserve . Will we see a hike in Interest Rates in september or december, or not until next year . Well, i do believe that the fed is not going to hike Interest Rates in september, but there will be a rate hike in december. I dont think they will wait until next year. Why they will postpone be on september because of three factors the Global Market volatility and uncertain growth is creating uncertainty. There is one option evaluating. Second, the direct price channels, the direct impact of china on growth in emerging markets in advanced economies, and impact on u. S. Economic growth. The tightening of Financial Conditions will also slow down Economic Growth in the United States and create more slack in the liberal markets. Then you have a slow down of inflation because of oil , energy, Commodity Prices creating further slowdowns in wage growth. Inflation is low and will stay low for a while, and on the other side, the u. S. Economy is doing quite well. Many sectors of the economy are growing and waiting beyond september, probably, be on december would not be warranted. The fed is not going to hike in september, most likely in december. Guy when they do hike in december, what will the impact on the emerging markets be . Do we fully understand that . When you model it, when you look at it, how much do we actually know about that process . Well, the emerging markets are not affected only by fed policy, but by the slowdown of china, by the end of the commodities super cycle. The number of macroeconomic policy mistakes, and also by political and geopolitical reasons independent of the fed, reflecting some of these emerging markets. Inthe fed were to raise Interest Rate and may strengthen the u. S. Dollar and increase the cost of borrowing for emergingmarkets. Therefore some of the capital outflows that are coming from the decision of the fed are going to continue in these emerging markets. A number of them look fragile, but not all of them. Some of them are running surpluses. Behink the markets will swinging between the better in the worst emerging markets. Anna and you join us on payroll friday. Havent seen you submit ns pguess. Can you give us your thoughts question mark what do you think the payrolls number is going to be . How good or bad will it have to be to change the feds mind . Number well, the payroll might be good like it has been in the last few months. The last few have been around 200,000 per month. I dont think the volatility from china is going to have an impact on payroll for the time being. The data are going to be back, in the turmoil from china will have an impact on Financial Condition and economic activity. The fed is comfortable that the labor market is strong enough, that the rate hike should occur, but they can be reasonably confident about inflation. On the labor criteria and the job creation, things will be confirmed to be positive but there is significant reasonable doubt that the fed may not be achieving that in the short run. Factor going to be the rather than the labor markets keeping the fed. Guy briefly, should draghi launch qe2 . Good talking with you. Guy we will wrap it up there. Thank you very much indeed for joining us. Anna we were going to talk about europe, werent we . We will pick up with him on another occasion. There were some tweaks to the plan in terms of the percentages of each asset they could buy. Lets have a look at futures. Guy a couple things you need to know first of all, it is payrolls. We will put the twitter . Let us know what your thoughts are. This is how we think the European Equity markets are. Down around 1 is probably where we will open this morning. U. S. Futures will be firming a little bit. They slid toward the back end of yesterday. Pricing has already happened to a certain extent. More negative than yesterday. Anna we got a negative german number, although we spoke supposed donovan who was telling us not to read too much into it. He also told us to reach the back revision number. Guy have a great weekend. Good morning and happy friday. Welcome to on the move. Moments away from the start of european trade in. Lets get straight to your morning brief. The final u. S. Labor Market Report before the fed september 000ting forecasted at 270, jobs. And anxious g20. Finance ministers descend on angora. Rate of an imminent hike. Falling on deaf ears in asia as the nikkei two to five heads to the biggest weekly loss in over one year. By 64 with futures down points in the dax futures off i 125. A bit of a route in asia. The nikkei open this friday morning with caroline hyde. The euphoria from the ecb, the chair for more stimulus fading fast. We are expecting the markets on the downward trajectory after significant rally on the ecd talking about potentially more stimulus to come buying up more upments of particular bonds to 33 and also saying we can expand the bond buying past 2016 and it could be more than one point one trillion euros. Then everyone starts to absorb the downward side of the fact that Global Growth will be lower. There will be lower inflation than had been predicted before