Transcripts For BLOOMBERG Countdown 20151201

This is switzerlands number one insurer. Interim ceo guy he has been struggling to turn this around. The reality maybe coming home to roost. Anna they have been trying to equity, and other targets which were apparently thwarted. Guy lets get you the bloomberg first word. Manufacturing pmi has dropped to the lowest level in three years. In atficial reading came 49. 6 in november. Six Central Bank Interest rate cuts in your have not been enough to slow refectory manufacturing. In a historic move, the imf will to its list of reserve currencies. The euro lost the most with the changes. They Australian Dollar held a second day of gains after the reserve bank kept rates unchanged at a record low 2 . Ill ise seventh month makers have left the rates untouched. Morgan stanley is planning to month policyh makers have left the rates untouched. Morgan stanley is playing to cut fixed income jobs. Shares rose on the news. David cameron calling for a vote tomorrow on extending airstrikes into syria. Corbyn said he would not force his members to vote in favor of the action. They will speak against and in favor of the airstrikes before the vote. For more on the stories and others had to bloomberg. Com. Check out how the asian markets are performing. Good morning to you and good , we are seeing a much brighter day for the first trading day of the month. The investors in reacting to the disappointing manufacturing data. Worst noting worth noting is that japan is closing higher by 1. 3 . We did have data out there showing Capital Spending jumped more than expected as the Company Profits increased in the third quarter. A good pickup in korea and a lot of focus on samsung electronics. Two of the ceos keeping their jobs but they will focus more on the feature rather than daytoday. Ups a great day in australia by over 2 on the close. What to show you some of the main stocks we have an run watching in the region. Casino revenue actually fell for an 18th straight month, down 32. 3 , youre on your year on year. Galaxy is one of the best performers on the hang seng index. An Interest Rate decision in australia today, no change is expected. We did see data showing that home prices in sydney actually had the biggest slump in five years in the month of november. All the banks looking quite good. As near a mentioned, we have seen the inclusion of the renminbi into the fdr. A little change in the yuan rate. Certainly a big day here in asia but has responded quite well so far. Lets pick up on that story she was just mentioning. Currency basket joins the euro, the pound, and the yen. Work enormous amount of has been undertaken by the chinese authorities in terms of statistics and Financial Market organization and supervision. It will clearly better represent the International Community based on those criterion of trade and freely usable currency. As anclusion is clearly important milestone on a journey that has begun months, if not years ago. The journey, which is a transition toward more marketdriven principles of the macroeconomic framework of china guy Christine Lagarde speaking after the announcement was made. Lets go to bloomberg intelligence. Lets see the domestic story. What does it mean for the Chinese Exchange rate . Guy i think there is a skeptical view from some in the , which is that with Mission Accomplished and the one in the basket, they will switch to reactions and focus on a comparative devaluation to support experts. China has been vociferous in denying that is the case. Built on the question whether that depreciation was not on the agenda. Growth has been stabilizing over the last few months. Stabilizing at a low level, but stabilizing. The case for extreme policy stimulus and competitive devaluation is not there. Secondly, and more importantly, chinas leaders had a bit of a nasty surprise in august when that many devaluation triggered extreme selling pressure on the currency. Bank of capital outflows. Well think the chinese leaders are in any mood to see an early repeat performance. Because the pbocs stated intentions, our expectation is in the immediate aftermath of the yuan inclusion we will stay stability. Anna we will see stability. Anna got a raft of data from money a factor in and nonmanufacturing from manufacturing and nonmanufacturing. Do you see stability here . I think that is right. Things are not getting better, but they are not getting worse either. The manufacturing pmi edged down a little bit. Was that neither are removed from october and they remain slightly below the 50 mark which separates improving from deteriorating conditions. What that suggests is stabilization in chinas growth and low level. Guy thank you for coming and joining us and giving us a lowdown. Tell mallick from beijing tom oleck from beijing. Anna mark, great to have you on the set with us. We have just been talking about china, and the conversation about the chinese growth story. You will be visiting europe. Do you see that europe and the u. S. Are looking at china through the same lens trying to work out how this rebalancing will fall into place . Guest china is a big story and will be going forward. But china is more important to europe in terms of direct trade, but china is the second largest economy on the planet, so everyone is focused. Guy is it stabilizing . Guest i hope so. The chinese are working hard to a compass that through monetary stimulus and fiscal policy. I think they will succeed. Report, ie previous think china will ensure the currency does not fall out of value in the near future, but if you told me a little year ago it would be lower than it is today, that would be a surprise. Anna how do you look at the reorientation away from manufacturing into services . What would be the right speed that should move . Globalmmentators say, economy is geared to old china, not new china. It takes a while for the rest of the economy to keep up. Guest it is a process and has been underway for three to four years. It will take at least a decade to make this transition. They are trying to do a lot of transitions. Not only moving from export oriented to consumption led economy but they have other structural imbalances. They have a lot of balls in the air and it will be difficult to do quickly. Process, but a when you look at the pmi data, we need to put that into a broader context. It is not just manufacturing. You cannot judge the chinese economy by pmi manufacturing. Consumption is strong. It is holding up firm in china. It is the entire economy that matters. Guy as a commodity producer, thats not true. Guest there are winners and losers and we are seeing the commodity producers are losers in this. Bad . How long does it stay guest we are probably close to bottom, in terms of the general prices across the commodity complex, it has priced in a lot of bad news. The Financial Markets always overshoot, but the fundamentals would suggest we are always close to bottom. Would probably see prices starting to rise again. Anna is that because they see where it has got to and say that is low enough for now . We have done a lot in terms of fiscal stimulus and six runs of Interest Rate cuts on the monetary six rounds of Interest Rate cuts on the monetary side, and that means commodities stay where they are . Guest i think the chinese economy will continue to slow, by design. As long as their growth rates are slowing, the demand will be softer, as a result that will put downward pressure on commodity prices. The u. S. Dollar is strong and it will probably appreciate more in value and will put pressure on global commodity prices. I think they are a bottom, but i do not see the moving up soon. You should know, i did not anticipate any of this decline a year ago. Is how much of a capacity there in the manufacturing . Guest a lot of capacity. Guy what is the unwind . Guest that is part of the transition. It is a process. Financial markets discount that process more quickly. Guy there is an awful lot of deflation that needs to be exported. How does the rest of the world react to that process . The central bank will be looking thinking, prices will remain low for quite a long time. Guest they have the service side of the economy which matters a lot. In europe, it matters a lot more. If you go to the u. S. And the u. K. , the economy is coming into full employment and wage pressure is starting to develop, that will trump the inflation on the manufacturing side. Overall inflation will pick up. Not quickly. Guy are you surprised how long it has stayed low . Guest no. Like everything, you expect it sooner than it does, but we have a lot of slack and the labor market. We still have not observed all the slack. The Unemployment Rate is back, but there are a lot more parttimers and fulltime workers out of the workforce. You have to absorb that. Anna a while ago, mark carney was talking about how at the turn of the year, you begin to see more clearly the impact of the oil price would have dropped out and there are year on year comparisons. Is that the case . Given that the oil price, and the weakness of it, has secondary impacts on all caps a products. Of just petrol all kinds products. Not just petrol, gas, and oil. Guest the natural inflation is somewhere around 1. 5 and that is becoming clear in the data. It is quite stable, despite that slide in commodity prices. Core inflation in economies like the u. S. And the u. K. Are close to bottom. Look out two years from now, assuming continued improvement in the labor market, you will see that core inflation start to rise. Anna mark zandi, thank you for being with us. The euro,vent talked but we will get off that considering draghi is talking later this week. Manufacturing data, numbers across the globe from italy him of france, the u. K. , the u. S. , and the eurozone unemployment figures as well. Anna what to expect from the bank of englands Financial Stability report, and big changes that Morgan Stanley. Up next. Anna welcome back, youre watching countdown. Reporter Morgan Stanley is planning to cut a quarter of its fixed income jobs. The Company Reported a 42 plunge in bond trading revenue last quarter. The cuts will be across all regions and are set to take place before the end of the year. Anothers have pulled 224 million out of btg. Around 40 of the net assets listed have been withdrawn. That follows the arrest of the who is accusedo of interfering in a corruption inquiry. Billionaire Hedge Fund Manager David Einhorns Greenlight Capital fell 5. 2 in november. It is poised for only its second losing year in two decades. The losses bring the yearly dropped almost 21 , and its positions in Consol Energy and Micron Technology failed to pay off. More on these stories and others on bloomberg. Com. Anna thank you, very much. Guy so sector stability is very much under the microscope. Soon we will get the results of the bank of englands stress test. Caroline hyde is here. Lets look into what we can expect. If there is a concern, what is it . Caroline the concern is what does the record low borrowing cost to in terms of stimulating too much risktaking in the banking sector. That is what mark carney will onep his bdi on beady eye this morning. Has the government clamped down enough . Unsecured lending. Think credit cards. Is there too much leverage in the consumer . Does that mean, as you see in the third bullet, bankCapital Buffers up again. Zero, beenin because when times were bad the banks would lend more and keep the economy going, but when they see an uptick, they dont want banks to lend like countercyclical capital buffer could rise off that level of zero to get ahead of the curve. We spoke to the Deputy Governor of the bank of england saying he would prefer sooner rather than later. Anna we have the Financial Stability and the stress test. Which of those banks are most at risk on the stress test . Caroline keep an eye on hsbc. Ys and lloyds, rbs, Standard Chartered and santender. They will all be looked at. Can they sustain a slump in the emerging market . Can they sustain a u. K. Slowdown . U. S. Stagnation . Oil at 38 a barrel and the euro slumping by 25 versus the dollar at 15 against the pound. What would that do to backing stability . With they still have leverage ratio of 3 . Barclays could be a key issue with liquidity in the market. This is another area of concern, market illiquidity, particularly in the bond market. Despite all the moves they have me to rate raise capital, and then scrapped their dividend. Guy what is going on elsewhere . Morgan stanley is the latest in a long line cutting back on fixed income. Caroline big news of course. Banks are being made to put more capital aside before their bond trading, and it makes it less profitable. Morgan stanley is standing stepping away from 25 of its bond business. We understand 25 , a quarter of all the jobs will be cut. Slumping,s have been you saw revenues in bond trading down more than 40 in the last quarter. That is the worst fixed income currency overall performance since 2010. No wonder they are raining back overall as they see the return on equity. Half of their overall riskweighted assets are in the bond trading area. Are they going to try to step back from riskweighted assets or step back from the bond trading as it has become so onerous from the capital point if you. As Morgan Stanley moves away, who wins . Not just Morgan Stanley, but the u. S. Has moved away. Deutsche bank and others have reduced that area of business. What is left . Just as we start to see Interest Rates rise and maybe as the bond market becomes a little bit more favorable. Anna caroline with the latest on the banking sector. Nejra the chief guy the chief economist at moodys still with us, mark, macro prudential, is this the right time to start using it . Is carney looking in the right direction . Guest we are just about their. The credits big it feels credit spigot feels just about wideopen. The booming in london and that market is in part fueled by increased leverage. I think it is about time to start thinking about it. You start with the other ways of doing it. Guest we are still a good ways away from rising rates here. My thinking was that once the fed starts to raise rates, the boe would be a few months behind but it now feels like it will be about a year behind. We will get a little bit more fiscal contraction here. Inconsequential, so it means we have to be a little bit less aggressive, but from macro prudential, it is about time to start thinking that credit growth and turning off ot just ait spig little bit. It will be a good experiment. This is the first time regulators have ever tried anything like this to mature the aggregate credit growth is consistent with the nominal economy. Anna do you countercyclical buffers forcing banks to put away money for the good times, the you think that is good . Do you think that is good . We still hear complaints from small to medium businesses. Is it right to start thinking about imposing that kind of measure . In theory, absolutely. But that also means and the bad times that Central Banks and regulators have to lower those buffers. The fear i have is that you tighten up in the good times and when things start to go down you are not quick enough to move and lower those Capital Buffers. In theory, it makes a lot of sense. Guy if it works, doesnt push the rate rise further out . Guest it does. In terms of Economic Growth it is not only the cost of that credit it is the availability of that credit. It goes to the Small Businesses and who can get credit and who cant. It is the combination of those things. They can use both of those tools in terms of trying to calibrate the economy. Anna thank you very much. Mark zandi stays with us longer. Guy this is a live shot. Look at this. 2 00midday beijing beijing. Talking more about them after the break. Guy 6 30 in london. Lets do bloombergs first word news with nejra. Nejra chinas pmi has dropped the threeest level in years. The weakest figure since august 2012. Six Central Bank Interest rate cuts any year have not been the imf will add a reserve currency alongside the dollar, euro pound and the yen. It will have a 10 rating. Housed aalian dollar second day of gains after the reserve bank of australia kept rates unchanged at a record low 2 . It is the second month they have left rates on touch untouched. Morgan stanley is planning to cut a quarter of its fixed income staff. The Company Recorded a plunge bond trading revenue last quarter. The cuts will be across all regions. Shares rose on the news. That is a bloombergs first word. This week in paris, negotiators from countries will try to reach a deal aimed at trying to reduce carbon emissions. Exactly was it caused . Tom gibson explains. Agree the last three decades have been successfully warmer at the earths surface than any since 1850. In the northern hemisphere, the less 30 years have been the warmest on record in the last 800 years. During the summer months, the melting can increase over three folds. In terms of area, that is the size of japan, vietnam and malaysia in ice every decade. Have sinking glaciers added to the rise in sea levels. Year increase per twice as fast in the last 20 years. The u. N. Has responsible for droughts, reduced crops and the extinction of several species. Years, global0 Greenhouse Gas emissions have risen 40 . Back in 1990, the biggest offender was the usa with nearly 70 of the worlds emissions. China has seen a pension at the top spot with 22 of the worlds emissions. Plants this year alone. The planet facing irreversible damage, the planet time is running out. Alive atline connan is the meeting. Busy first day. What do we get out of it in terms of the trajectory . Nearlye yes, it took three hours for the 147 liters to arrive and shake hands. Each country has three minutes to present their commitments. Barack obama says these meetings was an act of defiance just two weeks after the terrorist attacks. He had dinner with president hollande. Sident they discussed the response to the terror attacks. Will get into the hands of the 40,000 delegates over the next 10 days. During the first day, the leaders were trying to push an political the challenge is to balance the needs of the developing countries and the responsibility of the developed nations. The bolivian president was quite vocal about the responsibility sayingtalist countries the capitalist system is to blame. The second challenge is to find a degree of binding agreements. It is going to be difficult for the United States to ratify something that is legally binding. The u. S. President still said he is committed to help developing nations for this transition. Helping developing nations skip the dirty phase of development is vital to meeting this challenge. One of the things that we discussed. You have printed Million People in india who do not have electricity. We cannot have a climate agreement that says they are permanently resigned to not having electricity. That is not an option. That theo make sure same process of development is taking place but using a whole new set of technologies and arrangements. Caroline as much as 100 theion per year from developed countries is it needed. The indian Prime Minister said he wont sign a deal if this commitment of 100 billion a year is not met. For now, according to our bloomberg research, funding to developing nations increased tween 2013 and 2014. Around the 62 billion dollars. There is almost 42 billion to go. Meeting is not at all only about climate change. The geopolitical tensions are also at stake. No eye contacts between barack obama and Vladimir Putin. They met for half an hour, however putin refused to meet separately with the turkish downdent after turkey shut turkey shot down the russian jet last week. Barack obama will meet with erdogan. Guy thank you very much indeed. Anna Business Leaders know whats going on this week as well. Ceo, he is going to be joining us. 8 15 london time. Guy india is one of the Major Players at the meeting. The reserve bank of india has left Interest Rates unchanged. Much in line with forecasts. More on the r. B. I. Decision,. Reop joins us no surprises from the r. B. I. This morning. What do we take away . Bank leftian central Interest Rates unchanged. Targets starting to look more vulnerable. Says they will Pay Attention to food and oil prices. The government also added inflation is expected to accelerate in december before plateauing. He said he will be monitoring the implementation of proposed space for civil servants. What did the governor have to say about the Global Economic environment . They indian rate trajectory . The indian rate trajectory . The central bank was closely monitoring the banks. Theernor states likelihood of a fed rate hike. [indiscernible] economy, the ecb can do on how foreign a fictitious are panning out. Thats how foreign expectations are panning out. Card butn for the race he will have to seek space for that. How the government how the Global Environment depreciates over the next couple of months. Anna thank you. He is a pretty smart guy. He is concerned about what is happening. This is the divergence. U. S. And germany to your spread. Where does it go next . I think it is wider. Were talking earlier, it is hard to believe the alltime peak in the spread was almost 300 basis. The 1990s. The u. S. And the eurozone economies are different trajectories. I think that spread will widen out. If you told me a year down the road, we would be closer to 200 basis points, i would say that would sound about right. Andreas this reflects anna this reflects whats the u. S. Economy is strong. The u. S. Economy is strong. The problem is going to be a lack of labor. The eurozone is a long way away from that kind of scenario. It is going to take a number of years to get there. That divergence in the economy means monetary policies. The spread is going to get wider. Guy what this wage growth look like. If you look at some of the fort indicators, they are not that aggressive in terms of inflation. Mark it is going to be higher. Just north of 2 . That is roughly where it has been since recovery began almost seven years ago. There is science it is beginning to pick up. A year from now, i would say , 3. 5 . To three anna the impact that says we are going to get some inflation. Mark i have been surprised by the debate. It always happens. As we were discussing, it takes a little longer than you think. Ive been through a couple of business cycles. This always happens. Where are the jobs . And you get jobs. Where is the wage growth . And then you get wage growth. Pickup and a big ramp up. All it takes is one company and each industry to say i am losing my people. Ive got to raise wages. Once that company goes, every company has to go. Anna it is not different this time. Mark i dont think so. Anna mark zandi stays with us. Guy up next, the russian president snubs the turkish as the pilotparis from the downed jet is returned to russia. We will bring you the latest. That story when we come back. Anna welcome back. Breaking news for you. Xeric is pretty relevant 08 is pretty relevant. Stagnation in the third quarter. The swiss are watching very carefully with what is happening with the ecb. You start seeing the ecb pushing the deposit rate down. Life is going to get tough for the smb. How do they react . Morgan stanley is planning to cut a quarter of its fixed income staff according to people with knowledge of the matter. The Company Reported a 42 plunge last quarter. The cuts will be across all regions and set to take place for the end of the year. Shares rose on the news. Chairman has been h has been reported sinceas been the ceo 2010. China movesmes as to curve the largest Gaming Center has fallen 35 this year. That is a Bloomberg Business flash. Anna . Guy . Meeting in brussels to betweenthe response russia and turkey. Climate talks in paris. President the portly snub the turkish president. Judges out of brussels, the senior vice president. Ryan, the climate is pretty frosty when it comes to these guys . Ryan there was hope of reconciliation. Theot putin reckoning up rhetoric. Accusing turkey of downing that russian jet. Legal trade and Islamic State oil. Putin says he is a new information that proves that. That and raised everyone does. Hat enraged and on if it isnt proven true, the russians need to prove it, that Vladimir Putin should resign. These guys far from reconciliation. It follows a half apology from the turks over the weekend. Very careful handling of the body of the pilot that was killed in syria. Fullurks made sure it got military honors. Everything was done in tradition. That body has been repatriated. They made a lot of conciliatory comments going into the meeting. As you can see, things dont look good. The russian president said how could you have a Broad Coalition. He didnt meet president obama. He did meet president obama. Look at the body language. When the to shake hands, they dont look at one another. This is a really frosty relationship. Inis difficult to imagine this context, how you can get real cooperation in syria when you have at least three countries that need to cooperate seeing things very differently. Anna further illustrations of how it is difficult it is going to be to forge a common front. That is true. That is worrying for the europeans, especially for Angela Merkel who is under extreme pressure. It is clear to european policymakers that you need a solution in syria if you want to get to the root of the refugee problem. You cant achieve without involving russia and turkey, if you look back at the meeting on sunday, the turkey summit. There is a huge drive from the european side to engage with both sides. To this standoff, this is not getting any easier. Guy doesnt merkel stand up now. Shes got a lot riding on this. She needs to make sure these guys see i tie. Her offering concessions to make this happen . Carsten to the turks, you have seen that. Whether we are talking about the europeans giving to turkey to look after refugees in turkey, instead of letting them move in through the balkan root the balkan route. It is clear she is making concessions. With putin it may be more difficult. The biggest mistake from the european missed that the european perspective is to assume that syria is a bargaining chip. Russia is following strategic gain in both conflicts. They are separate from each other. It is clear that when it comes to engagement between the west this is important times for her. Anna are others trying to mix to two together mix the two together . A part inussia plays both conflicts. It will be too easy to assume that russia will simply give eggs. S strategic looking at both conflicts in their own right, it is something the west needs to continue doing. Guy what is the russian economy looking like . It has been quite volatile. What everybodys talking about is that russia has introduced a ban from a food food from turkey. Sayings has a report out that december 11 when the central bank of russia meets. Even though these are medium estimates, they are going to cut Interest Rates to 10. 5 . To try and spur growth. Maybe hold off doing that. Barclays changing their mind on what theyre going to do. On foodave this ban imports. That is going to help the drupal. It does affect russias ability to turn the corner and bring the economy back. You have to ask yourself why does russia do this . They think their own to hurt the turks more by denying the import of turkish food. The russians really believe in this idea of import substitution. They will look at the manufacturing numbers this at 50. , pmi coming in indicating expansion. They think this is working. They think if russians have less turkish tomatoes on the table, that is not a problem because we are going to get those russian tomatoes. Anna in support of what you have been saying, russian sanctions against turkey may have 2 to russian cpi. Guy it would bring us to the highest inflation weve seen since 2001. That is very high. Anna what is your focused on the russian economy what is your focused on the russian economy at the moment . Do you think the Biggest Issue the weakness in the oil price . Ryan it is all about oil. The russian economy has a hard time gaining traction. If Oil Prices Start to move north, that lives the russian economy. The geopolitical stuff matters. It is on the margin. It is an oil economy. That is the key driver. , a year down the road if oil is where it still is, it is not just the price, it is the duration of the price. It is 12 months, two years down the road. Mark they can dig in for a long time. Putin has complete control. He can do this for a long time. The russians have been through a lot over the century. If this is happening in the u. S. Or u. K. , you would see a very different kind of reaction. Policymakers would have to respond. I dont see that in russia. Alexey kudrow these to be the finance minister loved by western investors may come back. He has been in a think tank. He may come back in the president ial administration to begin reforms. He could come back as Prime Minister. This gets to his russia going to invent itself is russia going to reinvent itself . Time and time with asked this and it has failed to. Embargoes mark iranian embargoes. I just tend to adjust and adapt. They fill in the holes through time. Anna thank you for joining us. Mark zandi. Thank you for joining us carsten nickel. Well take a short break. Well talk banking next. Anna capital concerns. Is it that is banking becoming tougher . Balancing act chinese manufacturing hits a three year low. All engines of growth and suffering. Bloomberg learned that Morgan Stanley plans to cut a quarter of its fixed income jobs. Guy welcome to the pulse. Welcome to countdown. Seven major u. K. Banks have passed. Bank of england keeping its capital buffer at zero. Saying the bank of england signals rising to 1 . Plenty of news coming out. Guy no [indiscernible] hbc hsbc. Standard chartered didnt meet on capital requirements. The details are important. Weekly show you how we think the European Equity markets of and open. The stoxx 600 up by about that much. We had some negative data out of china earlier on. We are getting a front foot reaction in european equities. On the first day of december. Maybe santa claus is writing to the rescue. And as little rally. Decenthings look pretty in the asian session. Nejra chinas manufacturing pmi has dropped to the lowest level in three years. In november. 49. 36 six Central Bank Interest rate cuts in the year havent been enough to spur recovery in manufacturing. To imf will at the u. N. Reserve currencies alongside the dollar, euro pound and the yen. It will have a waiting. Dollar housed a second day of gains after the reserve bank of australia cap rates unchanged at a record low of 2 . Policymakers have left rates untouched. Morgan stanley is planning to cut as many as a quarter of its fixed income staff according to people with knowledge. They recorded a 42 plunge last be across cuts will all regions and set to take place before the end of the year. That is bloombergs first word. Guy . And a . Guy the bank of england just published a whole bunch of stuff. It said the seven major u. K. Banks passing the strength test. Details are important. What happens next, critical. Caroline is here with more details. Caroline lets dig into those banks. Thereven all caps, but are some interesting nuances. Standard chartered being one of them. The chief executive having to sell a new shares, 5 billion worth. Trying to raise more funds. Missed theartered Tier One Capital goal in the stress test. China justt is 1. 7 growth. A slowdown in europe and oil falling to 38 a barrel. Under these circumstances, Standard Chartered was not able to keep the 4. 5 core to one ratio that was necessary. Rbs and Standard Chartered say the action in 2015 means that no new capital plans are needed. Overall, they feel the banks have taken enough action to keep themselves strong. Standard chartered did miss that overall Tier One Capital goal. All in all, all seven past. They can to the details of financial policies the Financial Stability reports are saying. They are worried about the u. K. Economy. It remains challenging, and particularly the are a close eye on the real estate market. Amid the record low borrowing costs. Too much lending to the consumer and he comes to housing. Too many people coming too many people doing buy to let at the moment. They will monitor it closely. They like the fact that the potential Regulatory Authority will be analyzing this and the underwriting of banks under this particular circumstance. Interesting that we saw it change to cyclical Capital Buffers intended. Countercyclical capital buffer, that is how much banks need to set aside to be sure their lending they are lending enough when times get bad. Will remain at zero. It will continue to support banks lending for the time being. Come march, we can see the capital buffer rise up. That will be the same as raising Interest Rates. It will make banks lend less. What theynd ourselves were analyzing today. They were trying to look at the seven lenders, that is barclays, lloyds, rbs, Standard Chartered. Are they all Strong Enough to withstand these scenarios. A dramatic slowdown in china. Slowdown in the u. S. And u. K. In europe. Oil at 38 a barrel. Slumping 25 . One of the vulnerabilities many were worried about, barclays issues its resort liquiditys market. There were concerns about private security here at what we see if we saw a similar lehman crisis once again. All seven half past. Standard chartered not quite 21 capital pass the goal in the stress test. That capital plan means they are stronger for the long haul. Back to you. Guy otto dichtl joins us now. First reactions echo any surprises . Beo first reaction would slightly better outcome for the banks then couldve been the case. It of the question marks, does not so much if the banks would pass, but if there is going to be any restrictions coming out of this test for them stillt seems that rbs is going through the later stage of its recovery. Standard chartered which we already knew that was affected. The others seem to have gotten First Impression. Bill of claim health. Slightly better than expected. Anna the interesting way around countercyclical Capital Buffers. They kept them at zero. They could go up as soon as march. They have 1 in march. Do you like that . Do you like the way that is supposed to work . Uppping excesses, building for the good times. Otto that does make sense. In terms of market dynamics, there is debate whether. 5 requirement would already be introduced now. It is pushing this measure out slightly further then couldve been the case may be First Impression at the margins slightly lighter impact. , so a few other items like far there is no resection on buy to let mortgage lending. Anna ready to act. Otto we can always watch as long as nothing is done, basically leaving that market. Guy if there were to be change, what would it mean . If they were to start applying resections. Otto they could start applying loan to value. I cap on banks where they cannot go a cap on banks, where they cannot go higher. Different measures that constrain the ability to give risky part ofost the market. Maybe it is easier to stand back and monitor. Maybe there is a reason to step back and watch. All of this has to factor in to the fiscal picture as well. How d. C. What the bank of england how do you see what the bank of england is doing here . Do you think these are the right kind of actions . Otto it is in line with the bank of englands policy so far. It is mandate to conduct fiscal policy. It had a supportive approach to the u. K. Economy with low Interest Rates and trying to. Ncourage lending and Recovery Support prices in the market, etc. The tendency seems to be in that context again that it is not putting overly jim cohen he and restrictions on the banks, markets to ease it back into an idea that eventually it should get normalized. Guy how much more capital do we need . When you plug in numbers, how much more capital does the u. K. Banking sector need echo it is good be rise need . It is going to be rising. Where are we on what the bank is going to require . To dothe banks will need 3 more will need to present to 3 more. A pretty slow phasing. The main requirement are fulfilled by banks. It is now about the law the last these is. Things like the countercyclical itfer that gradually act, it is a balancing especially the equity market. The credit market really. Equity market seems to have a strong focus on dividend paying abilities. Banks and dividend stocks basically. The question is how much profitability is available for that . How much do we have to go into capital build . How much into growth . The three will interact. Seem following the announcement this morning, the dividends look safer . Otto it looks that way. There were some question marks by some lloyds, barclays was mentioned. A test of trading focus. It seems a slightly better outcome. Anna thanks for joining us. Good to get your insight. What else do we got coming up . Chinese men effecting data coming out. U. K. , the u. S. He yuan next, a boost to the as it makes its way into the imf basket. What that means for china . That is next. Anna welcome back. It is quarter past 11 00. Nejra Morgan Stanley is planning to cut a quarter of its fixed income staff. The Company Reported a 42 plunge and bond trading revenue last quarter. The cuts will be across all regions and to set to take place before the end of the year. Shares rose on the news. Zurich Insurance Group will leave the company at the end of this year. The chairman has been appointed interim ceo. A replacement is underway. David and horn Greenlight Capital fell 5. 2 in december in september. 21 . Oss brings the fund to that is your bloombergs business flash. For more the stores, head to bloomberg. Com. Guy what is going on in asia . Lets find out. Juliets Juliette Saly is standing by. Juliette a better picture to start the month off with. We had the shanghai composite close by. 33 . Private gauge, the tyson the thai shin a little bit better in beating the estimates. Some great gains coming through in hong kong today. Disappointing numbers coming out of macau. The markets that already closed had solid days. We have data out of japan. This spending jumping more than expected. To Company Profits increasing in the third quarter. A shakeup at the top of samsung. This is the picture as you can see on the regional index. Every sector moving higher. Here are a few of the stocks we have been watching. A big jump in the last hour of trade. In property stocks on the asian arket in china, you can see 10 daily limit in shanghai. Touching the banks and australia, there was Interest Rate decision there. No official change to the cash rate. In india, we have seen bonds gain as the reserve bank of india has remained accommodative with its policies. The you want and focus today. The imf special ask it the yuan added to the imf special basket. The remember the will be one of the five currencies in the imf. Back to you. Saly joining us from hong kong. Anna the latest addition to the imf reserves currency market. Tom orlik is in beijing. What does this mean for chinas Exchange Rate . The applications for the currency first. Tom there is a single view in the market from some market dispense that having achieved their objective for the yuan, chinas policymakers are going to shift focus and allow a competitive devaluation to boost exports. We saw it chinas Central Banks coming up with a press conference earlier today. The Deputy Governor of the pboc was back against the idea, saying there was no basis or concern no basis for concern about depreciation for chinas currency. Even though growth is weak, it has been stabilizing since the beginning of the third quarter. We think chinas leaders had enough shock in august when that and devaluation of the yuan two months of record capital outlays. We dont think china is in any hurry to see a repeat performance. Our expectation we are going to and tinued stability in chinas Exchange Rate. Guy are the date that showing signs of stability . Are the data showing signs of stability . Bit,the pmi came down a manufacturingin pmi. The services pmi put it together, very little change from october. That strengthened our view that the huge amount of stimulus which china policymakers have thrown into the economy have not made things better yet but they have stop things from getting worse. Tom orlik joining us there. Guy a weather related subject. Commodities. The biggest monthly decline since july. Opec showing slides of slowing, reducing heading into next policy meeting which is pretty soon. Head of Natural Resources and commodities for ema. Good morning. Heading into opec, oil has come down into the sub 40 area. Distressingis a malcontent there is a distressing malcontent around the market bouncing around the second half. Iran could accommodate three the in barrels or so. 5,000 hey could another 500,000 later. There is a lot of skips about when theyre going to do it. That is a real risk. The other thing is stocks. Oil stocks are about 300 Million Barrels above. In the grand scheme, it is not crazy. That is for day oil supply. Fourday oil supply. When saudive seen is arabia has limited capacity, the oil maggert the oil market can the oil market tends to rebound. The oil prices can stay quite low. See opec anna do you sticking . Everybody is at the whim of that strategy. They have seen highcost producers taking their market share. Whether it is shale, you can argue that question. Iteel if you have is hurting them a lot. It is been driving down the number anna it has been driving down the number. Alex this is the conundrum. There was an argument that Shale Oil Wells declined very quick. You got to keep reinvesting. Fall below your inquiry investment threshold, you get a quick slowdown. What we are seeing is that slowdown happening. It turns out very quick and all terms, a year to a few months. Interest is expecting all supply coming outside opec. Guy the market gets into the balance at some point next year. Until then, were still building stocks. Longme the effect of how that stock builds desk that stock build is going to last that stock build is going to last for. Alex if you take 300 Million Barrels, you could argue that is a very long time. What we see is the oil market is very forwardlooking did what it sees balance, we expect passes will start to come up. We are looking at a very slow increase. Lapseer that those time is still in effect. If you have not undertaken a project this year, in three years time, those specs will come true. About 300 billion phrase phase, that could start to increase. The Oil Companies seem wellpositioned to you . Which less so . Alex the big ones. The small ones having a tougher time. Integrated are coping the best. They defied everybody and have done very well. Integrators are doing well. They have options. They can sell things, cut costs. These are huge entities which have taken on a lot of costs. You can see, i have been doing the conference circuit, start of the year, everybody was in a packet was in a panic. Now theyre in it for a long run. Theyve got a plan. Theyre going for. Small guys, that is where the problem arises. They have a very fixed business plans. Anna thanks for joining us. Director for ema a. Morgan stanley set to jobs set to slash jobs. We will tell you after the break. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Is 7 30 in london. Beijing a little bit earlier. Anna it looks chilly. At howave a look everything is shaping up. We looked at the asian session. Guy it is day one of december. It is any indication, it has been positive. That is the fair value calculation there. That gives you the calculation of the bloomberg terminal. London may be a little bit more positive. Pastn of uks banks the stress test. Rbf failed to meet its individual guidelines. Chinas manufacturing pmi has dropped to the lowest level in three years. The official reading came in at 39. 6. We have had six central Interest Rate cuts in one year. The imf will add the you been to its basket of currencies will of the un to its basket currencies. The u. K. Prime minister David Cameron called for a vote tomorrow for extending airstrikes in syria. He said he would not force members of his party to oppose action. People will speak against and in favor of the airstrikes before the vote. Back to you. Guy youve been tracking down the Morgan Stanley story. The latest in a long line of big banks cutting back on their fixed income. 25 is really aggressive. It is, indeed. What we have heard is these cuts will happen across all regions and will take place in the next two weeks and will amount to a reduction of 25 of the fixed income trading. Ands of revenue declines insufficient returns. Even the Morgan Stanley has , more than capital reduced how much it requires by more than half in the past four years. The bank still has not reached its goal for the return on equities. This comes after last month, the Bank Reported a 42 plunge and bond trading revenue. The ceo called it the worst quarter for fixed income, currencies, and commodities since 2010. Organ stanley is not alone. Morgan stanley is not alone. Barclays is cutting back on the units to reign in costs. If we look at the 10 biggest Global Investment banks, we see revenue actually on pace to drop to 65 billion this year. That would be the lowest since the financial crisis and also, less than half of what those companies produce in 2009. We see a big shift happening here. What is not clear is Morgan Stanley has already said it could be seeing the bottom of ficc trading losses. We could see a pickup in that, but it is still not clear how much revenue this unit would produce after stabilizing. Timesks like uncertain are calling for drastic measures. Back to you. Guy thanks very much. World leaders have called on companies and countries to put a price on carbon. A Carbon Tax Coalition was announced at the cop21 talks by six heads of state, the imf, and the world banks. We know the most direct path to zero net global emissions is through carbon pricing. It is critical for reducing emissions, preserving our environment, and protecting the. When green taxes are incorporated into our climate policies, we can harness forces that can lead to profound changes in our emissions. A strong, credible, predictable price on carbon is what will allow us to generate the necessary investments. The price has to do not just with penalizing the enemy. We know the enemy is carbon and we know we should put a big, fat price on it. Interesting language. We are just outside paris, following events at the senate. Hans nichols is there. We will do the geopolitics with the climate with caroline. He will this effect and how will it happen . Caroline this is the recurring debate about creating Carbon Markets and the carbon tax. Reasons forof the the summit in 2009. This is why it failed to achieve its desired results. Six countries including france, germany, mexico, chile, and canada have announced the initiative in order to create and put a price on carbon by 2020. The World Bank Resident has said the number of Carbon Markets in the world has actually tripled. 40 states and countries, including some of the United States, putting a price on the Carbon Market. The problem is the correlation between the Carbon Markets and the failure to really make the systems efficient. Emissionsyou have the trading system and this is very difficult to really check every whetheractories to know their ets system. Lowprice of carbon is too according to the french government. The price in europe has crashed from 30 euros to about five euros at the moment. A big challenge there. The next take Carbon Market will be china. China already has pilot programs in seven cities across the country. They are planning to create the biggest Carbon Market by 2017. There will be a key player since china has become the worlds biggest player. President hollande said we should be realistic and putting a global tax on carbon. Hans, there is a significant geopolitical sideshow at cop21 that we are watching. We have seen the fallout from turkey downing the Russian Military jet. There have been a few pointed comments on the matter. Take us through that. Hans this also them from a 30 minute meeting Vladimir Putin had with barack obama. The advisors and putin talked about different approaches. Putin spoke about how he was personally taking the downing of the jet in turkey. He said it is coloring his view of some sort of antiisis coalition. Here is what he said in terms of having a broader coalition. He said it is shot down by the turkey military. Can kind of Broad Coalition we talk about . This is after he refused to have a oneonone meeting. After his meeting with obama he said on the whole, i feel we have an understanding of where we need to go. Painted a different picture. The International Security advisor talked about how it was a mixed picture. He said one of the concerns they have with putin is they are still targeting legitimate opposition groups. He did say there has been some progress on russian targets targeting legitimate isis targets. Mr. Obama did give somewhat of an offer to mr. Putin saying he for thed his regret downing of the plane. That is short of the apology that mr. Putin clearly wants. His turkish counterpart is clearly not going to give it. As long as we are following this diplomacy, it is clear that he wanted a meeting with mr. Putin to clear things up. He was told there was not time on mr. Putins schedule. Back to you. Guy thank you very much indeed. Anna lets bring in some other voices and to this conversation. Elson. Peter you. , good morning to how do you look at the developments coming out of cop21. Are you looking at sustainable investments. Looking at carbon pricing. How does this affect you . Peter we hold a few Renewable Energy companies. Tocant offer that product institutions, but our main public funds are not the strictly ethical funds and yet we still find really interesting opportunities in that area. Fore Renewable Energy funds legitimate yields that make sense in their own right. When you talk to u. S. Investors, they are talking carefully what the fed trajectory is at the moment and trying to work out whether they should continue to invest as rates start to normalize. Peter that is a tricky one. Those things that get off a high yield might be impacted. I not sure if that is the case. When inflation starts to go up, prices at which these companies are selling go up as well. Guy is that the case . Peter the pricing structures for these companies are linked to the r. B. I. They both go up at the same time. That relationship is a little bit more complicated than people give it credit for. See anhose who want to increased focus on environmental factors and who want to see a Push Towards Renewables often goingo the oil price higher to give a boost to their argument. You are expecting a Higher Oil Price in the future. One of the things people dont mention in regards to opec is not necessarily the u. S. Lowcost. There is a second argument, every other source of energy. Ultimately, there is a tradeoff between oil and other energy forms. When you think about the oil price, when you think of about what companies are doing right now, does it play against investing in renewables . There are arguments on both sides. There is an enormous structural argument for investing in renewables, as opposed to the cyclicals. Guy guess is as cheap as it is right now. A lot of these renewables, the case for them from the cost perspective was challenged even when the old price was 100. These things need support, they need government incentives, for people to invest in them. You can measure the cost of oil in terms of extraction, whether are, which is a bit higher. You could mention the cost in terms of society, burning the oil. If you do that, then arguably, the cost of oil is much higher. It is how do you put the cost on your health . Had you put a cost on polluting the atmosphere . It is difficult to do that. But if you do do that, the cost is way way higher than the cost of Renewable Energy, even without government incentives. Anna what kind of Renewable Energies do you have . You do have exposure with Renewable Energies. What about more broadly . Are a little bit like foreign exchange. It gives an awful lot in the wake of risk, but not much in the way of return. We are talking about cyclical commodities here. On top of that, they are very hard to value. Theyo you value them when dont yield anything. The only way i found to value them is to look at the inflation adjusted price of these things. And then you start to see these longterm cycles. Right now, they are a long way from their historic lowls. S. The oil price is getting close 20 yearsstoric low, ago. And before that, 50 years ago. It can go low in the shortterm. Many other commodities, gold for example gold is still only at its longterm historical average. My argument is that it will continue to fall. Anna peter, thank you. Peter from seneca investment stays with us. Countdown, we will talk about the stocks open. Anna welcome back, you are watching countdown. Morgan stanley is planning to cut up to one quarter of its fixed income staff. The Company Reported a 42 plunge in bond trading revenue last quarter. The cuts will be across all regions and will take place the for the end of the year. The billionaire Hedge Fund Manager Greenlight Capital fell in november. The losses bring the funds yearly drop to almost 21 . The casino revenue fell by 32 in november, marking the 18th straight month of decline. The plunge comes as china moves to curb the illicit money from the mainland. That is your Bloomberg Business flash. For more on these stories and others, go to bloomberg. Com. Guy london in particular, looks like it will have a solid day. A bunch of stocks are on the move. 7 10 oflondon there, up 1 . We have the fair value calculations. Find exactly how the market of stocks are doing. Caroline hyde, over to you. On the back of all passing the most recent stress test. Flying passed with colors. Capital. To raise more one of the banks did not completely pass the stress test in terms of its minimum Tier One Capital. The 6 level was not met under the 6 situation. They have done so much to raise new shares as of late. They do not have to give any more practicalities to the bank of england. I do past because they have done it enough already. Rbf has done enough in the past to ensure that it passes the bank of england stress test. What about the u. K. Buffer . To make sure they remained resilient in the u. K. Economy. They might have to raise new money come march, if the buffer is raised 1 . Retail. Home it could jump as much as 10 . This is why we saw the shares jump higher on november 23. Private equities are eyeing the owenner. It could be worse, anything up to one billion pounds. The german reduces its earnings target for the third time in just over a year. Peter elston is still with us. What is your sense of what stocks will do in 2016 . If i am looking to invest, is it in equities that i should . Peter we are conscious of the fact that we are quite a long way into the market. Guy quite a long way into it. To be fair, and the market tends to reflect how bad the previous crash was. Lets remember the crash in 20082009 was pretty horrendous. The Recovery Period will be a lot longer this time. Europe is much further behind. And the way i measure that is the Unemployment Rate. The Unemployment Rate in the u. S. Is getting close to its historic lows. In europe, you are still in double digits and have a long way to go. That tells me that monetary europe, as remain in opposed to the u. S. Evaluation wise, most equity markets are still relatively cheap. They are above their historic averages. Then, put that in the context of average Interest Rates. The case is quite a good one. Anna does that mean you do or dont like european banks . Peter well, we dont like banks anywhere. Credit is roddick. Credit is product. Then you have government trying to protect taxpayers that is a very difficult environment for banks. It is a very difficult bank to analyze anyways. Anna thank you for joining us, peter elston. We are getting you ready for the trading day. Guy five minutes to go until the cash open. Jonathan ferro will take us from there. Me, look to the chinese manufacturing numbers. Look at the nonmanufacturing numbers. The miners will be looking at the manufacturing numbers. Ae pmi number in china is at three year low. I will be speaking to a man who knows a fair bit about mining, tom companies. Tom albanese. Coming up in 36 minutes, a man who thinks euro will be stronger. Will bevid bloom, i speaking to him later in the program. Anna john, thank you very much. The european markets will be a little stronger. Guy lets quickly show you. London is outperforming continental markets envelope and 2 10 of 1 higher. We will walk you through the numbers as we get them. Anna see you tomorrow, everybody. Jonathan good morning and move. To on the i am Jonathan Ferro and we are moments away from the start of european trading. The bank of england said all seven major uk banks passed the stress test. The chinese manufacturing hits a three year low. The Mining Sector suffers. We speak exclusively to the ceo on this program. The dollar index retreats for the first time in five days. Watching for the open, 20 seconds away. The dollar retreats. The euro is stronger. The pound is a little bit stronger. We are five seconds away. We will get you the market opened very quickly. Reporter the site european stocks rally for we thought european stocks rally. Globally, it looks like investors are seeing the Positive Side of the data out of china. Lets see if the european stocks are opening on the positive. The 5100 is up for tenths of 1 . The dax is not open yet, but you know the equities have ended with gains on all but five occasions. Back to you. Jonathan thank you very much. Mark carney is just beginning a