Transcripts For BLOOMBERG Countdown 20160208

It is monday. The a warm welcome to program. China, big news over the weekend. The data for january and terms of Foreign Exchange reserves down by 99. 5 billion yuan. The Chinese Central Bank spending money to defend the currency. It was not as much of an outflow as feared. We have not even gotten into the year of the monkey yet. Manus it was not as bad as everybody thought. What we have is a little bit of a picture or our viewers in through this period 2014, 2015. Defending the yuan is the real story that comes through. We are seeing volatility rise. It is the Lunar New Year. We are seeing traders paying more premium for the u. S. The yuan to devalue going into this year. Janet yellen getting ready to speak. That is the big mark on the calendar. She speaks this week. Lets take a look at what has happened in the Foreign Exchange markets. The dollar got a bounce on friday. Holding onto those games on the dollar index. Above 97. Dollaryen, where are we at the moment . We are at 1204 on the won. Manus i love what jeffrey garlock says, which the dollar will fall into thousand 16. Guess what . The dollar actually dipped. That was last week. Breaking headlines from vtol vitol. Between 40 60 in the next 10 years. range. That is something for Central Banks all over the world and anyone worried about the inflation picture. Lets get the bloomberg first word news now. Good morning. Chinas for foreign currency reserves have fallen to a near fouryear low, 99. 5 billion in january, continuing a slow. It adds pressure on policymakers to strengthen the economy through fiscal easing and structural reforms. The ceo of vitol sees a decade of low oil prices. In an exclusive interview with bloomberg, ian taylor said prices will stay between 40 and 60 for 10 years. I think we need to imagine a band of 40 60. At 60, youve that thebring back on some of supply that will probably go out. Us, it is clear that a lot of the oil will produce a shutdown in the next year or so because it is simply too low of a price. Some of it could come back. And oilaudi arabia minister said he held successful talks with his venezuelan counterpart about ways of stabilizing the crude market. He did not reveal what producers should pay to shore up prices. The u. S. Parking a Ballistic Missile system on north koreas doorstep. It comes after north korea launched a longrange rocket over the weekend. The Denver Broncos have won super bowl 50. Von miller was named the games most valuable player. Cbs about 5aid million for a 32nd spot during spot during the broadcast. Markets are moving this morning. Looks like a bit of a riskon day. The aussie dollar rising. Caroline, take it away. Caroline lets dig into which markets are actually open as well. Looking for signs of Risk Appetite this morning. Where am i looking . I am looking in japan. We are starting to rise off of those initially bearish concerns. So many headwinds. North korea filer he firing that longrange rocket. That was a concern. So was the portrayed in japan. We have risen to the upward side. We are up 2. 2 on the topix. You are seeing a bit of Risk Appetite when it comes to the japanese stock market. It is all about the fx. We are seeing the yen that much lower. That is giving some giving support. Check out this correlation going back 12 months. I wanted to show this phenomenal chart. The topix gains, the yen weakens. You can see this correlation. It is just inverse. This has been the yen rallying. Nd the topix diving amazing correlation. I want to focus on what the fx market is doing to say today. As money is moving into equities, money is moving out of the yen. Japanese yen down by. 5 . All of those havens, the swiss franc, the euro, all down today. Instead, money into the aussie dollar, canadian dollar, the South African rand even. Commodities the most exposed. The yen, the euro, and the swiss franc dropping against the dollar. Why . A bit of a bounce in the dollar after the wage growth that we saw on friday. Could there still be room for a rate rise coming from the u. S. Later today . I will dig into the oil numbers later for you. For now, riskon when it comes to japan. Anna we are getting some news out of a platinum mining business. Manus net income at 107 million rand. They talk about the dividend. This is the critical issue in any of these mining companies. Considering further dividends. They talk about the market coming back into balance. That is going to be latched upon by the marketplace. Be there, talking to some prominent guests during programming. Some of these games that we are s, what about from amplat they are doing a capital globalture, Challenging Market conditions persisting. Manus the rhetoric has come through from everybody that we have spoken to. Anna lets talk about the chinese Foreign Exchange numbers. Robin joins us now. You are there holding the fort. Tell us what this latest data means. Robin three words. Depreciation depreciation, depreciation. If you are betting against the chinese currency, you are pretty much safe for the next few months. That thee careful numbers were lower than expected. The estimate was about 120 billion. Came in at 99. 5 billion. One must remember that these figures are for january, when the pboc stepped into the market. Nd really squeezed trading there was not much business happening. There was not much of a market at all. Almost 100, billion flowing out. That is more than the foreign Foreign Exchange reserves of many small countries. Talk to us about the implications for the pboc. We have had everything from the chinese. More verbal intervention, warning the marketplace they will not be defied, taking Interest Rates could 65 in hong kong. What does that do to the story . Robin these things are really complicating and robbing the pboc and the premier of options now. Do they support the economy . Do they focus on the currency . If they start supporting the economy, they have to allow the currency to decline a little bit. That, people are putting money into Foreign Investors and china. They do not want a further depreciation of the currency, so they are going to pull it out. The pboc is caught between a rock and a very hard place. There are very few options. It will be really interesting. After the Lunar New Year holiday, the pboc comes back, what it does. So far, a lot of liquidity in the market. It will be interesting to see what these guys do when they return. I think the depreciation for the currency is still intact. Manus thank you very much. Robin, our asian bonds editor. Are talking to the head of global Asset Allocation at ubs wealth management. Great to have you on the program this morning. What do you think the response is going to be from the chinese with regards to Foreign Exchange reserves . Are they going to continue spending at this rate . They could reach what the imf calls the line in the sand, 2. 6 billion of reserves by the summer. What does that mean to you . Lets hope they do not reach any lines in the sand. As we talk about this morning, some of the positive emotions in the markets are because numbers came out on the right side of expectations. People were nervous about this. The best that they can do is try someep a steady hand depreciation of the currency is priced into the market. Do not try to take that away, but do not let it accelerate, either. Manus what comes through is the term the returns for the yuan. When you look at the returns, this is over the asian basket of currency. The renminbi has fluctuated in the middle. It has not seen any dramatic move. They are achieving what they wanted, both verbally and with Interest Rate. Interest rates, 65 in hong kong. This is a central bank using a huge arsenal at its disposal. Mads it is using less than what we have seen from the west earlier. Some of us remember when they were at 500 . There was a situation in the u. K. Which did not go so well where it was even more. It is dramatic, but they also have quite substantial power. We are on the right track. It is a lot, but not as much as they had feared. If they go down from here, we could go into more stable territory. Manus anna this being the year of the monkey, your conclusion as to what the pboc might be up to. It sounds as you are not fearful of some sort of seismic shock coming from the chinese authorities. Mads i am absolutely fearful of it. That is one of the worst things we could imagine which could happen to the world this year. It. Ont expect it is understood by the markets. We had the situation last summer. We had the situation with the equities and the situation in autumn with the fx and in january with the fx and the exchange rates. It is a risk. Manus Asset Allocation. Last time you were with me, you said china was underweight and we were right. This is still the worstperforming index year to date. Are you still underweight . Do you think that is the correct position . How do you look at emerging market exposure and china . Mads lovely, we are underweight emerging market equities. We do not have any local currency. We also do not have any commodities in any portfolios. That is the way we look at that makes at the moment. Anna thank you very much for joining us. Mads stays with us. The u. S. , itow in is all about politics. New hampshire holds its first primary following the iowa caucuses. Anna the fed watch begins on wednesday. Janet yellen testifies on wednesday or thursday. Manus up next, low for longer. More from our exclusive interview with the ceo of the Worlds Energy trader and his expectations for a decade of low oil prices. Exciting, chris anna welcome back. This is countdown. Lets get the Bloomberg Business flash. Willglo americans ceo address investors, bankers, and the South African governments mining minister today. It will be his first appearance since unveiling an audacious overhaul in december. 70 of the companys value has been wiped out over the last year. And selling a stake of a Supermarket Company for 3. 1 billion. Accountingretailers was attacked for understating its debt. Volkswagen says it will publish annual results as soon as april and may hold the Shareholder Meeting in june. That is the latest schedule as the company determines the fallout from the diesel emissions scandal. Oil prices could stay low for as long as 10 years according to the Worlds Biggest Oil trader, speaking exclusively to Ryan Chilcote in a rare interview. Chineses says a slowing economy and u. S. Shale will act as a cap on any price rally. Still in a situation where we have too much supply. The balances do not like look like they are tightening up yet. I would not say for sure that prices have bottomed out. If you had to put your money on a number, the brent price at the end of the year would be what . 48. You can come back and kill me because i am sure i will be long. Ryan you do not see a sharp rebound in prices. Why not . I know that there are still some believers. We do not because there is so much stock buildup in the world. We believe it will take a long time to burn off that stock and that will happen over time. No one is going to wake up and see that there is no oil left. Ryan how long does it take to work through the stock and say, get back to 100 oil . I think it is a genuine question. There is so much more supply. We are being more efficient. The u. K. Consumption of oil is going down. Efficiency in cars is going up tremendously. You have to believe that it is a possibility that you will not necessarily go back above 100. I know i am very old and ugly and been in this business for far too long, but if you think of the last 4060 years, we have only been above 100 for only a few years. China has changed. Huge growth in those middle to 2000s was middle very dramatic. It happened at a time when we did not have as like shale. That growth has changed. Ryan you see the oil price at the end of the year at 48 a barrel. The year after that. Where do we move . Is there a band that you imagine . I do imagine a band and we band. Ly see a 40 60 we do believe that Something Like 60, you could bring back on some of the oil fields which will probably go out. U. S. Shale, a huge amount of discussion about that. I do not think the industry quite understands all the economics. For us, it is clear that a lot of the oil that will shut down in the next year or so because it will be simply too low of a price. Some of it could come back. That is very interesting. I dont think we understand it. But we see that possibly at about 5050 five dollars before it comes back on again. Band lasts until what . I could see the band lasting for 510 years. Anna lets bring in Ryan Chilcote, who is conducting the interview. Mads is still with us. We are a demanding bunch because he thinks oil prices will get to 48 on brent. We talk about that as not much of a rebound. That is more than 40 higher than we are right now. Ryan that is exactly right. In the shortterm, he thinks the price is going to improve. Though he does say, in general, it is a very bearish view compared to what we are hearing from the market in general, that we have not necessarily bottomed out. Over the next 510 years, we will be trading at a band of 40 60. Most in the oil industry are saying that in the second half of the year, we are going to get a recovery. They think we will be around 50 at the end of the year. Most of the big executives tell you that they see it going up from there. Them, 60, 70, 80. That is not the case, he says. I think this is a very bearish view. We have one of the biggest Oil Conferences in the world taking place this week. Tata will be there. Bp will be there. They have a more bullish view in the midto longterm. Manus you say that inventories is a critical thing that you keep an eye on. The world is drowning in oil. Everyone says that. Those excesses need to be worked off. There is growing concern about i am not going to say a recession, but people are concerned about the demand cycle. People are concerned about the demand cycle. There is what looks like a Global Manufacturing recession going on. As for the oil price, we maintain that we are not investing in oil or commodities at this level. We wait for the clearance to happen. Anna in your notes, you say that oil prices have never provoked a u. S. Recession, but cheaper crude costs are not yet providing the boosts that we thought it would do. Do we need to keep that in mind as we hang on every word that the oil Company Tells us . Mads and later this week, we hang on every number out of the retail report in the u. S. And what janet yellen says. We think it is coming, the boost from the oil price, but not the same as usually. Ryan what does what ian taylor is saying potentially mean for the Global Economy . Ors if we go back to 40 60 right away, we would be in a better place. Markets find it difficult to price that right away. Manus talk to us about Venezuelas Oil minister and his saudi arabia counterpart have made comments. Where are we in this relationship . The Venezuelan Oil minister met with the Saudi Arabian oil minister. They have been together in opec or years and said it was a very successful meeting. Does that mean there will be a supply cut and we will get opec teaming up with nonopec countries teaming up like we had 15 years ago . The answer is no, not necessarily. Those people are dismissive of the idea of russia, saudi arabia, and opec getting together or a cut. Ian taylor thought that it might be more likely than many people think. He still thinks it is a slim possibility, but he seems to think, and i think a lot of people out there are starting to wonder if the saudis are convinced that their strategy has been correct. Maybe some people in saudi arabia are starting to think this idea of flooding the market with oil and eventually get a price rebound, that is taking longer than we thought. We can do it, but it will cost us tens of millions of dollars of our reserves. So we get that shift in saudi policy. We might get a shift in the way opec views things as well. Anna funny how that could happen. Ryan chilcote joining us for that fascinating interview. Up next, it is the law of diminishing returns. How the bank of japans measures are you losing their effectiveness. We are live from tokyo next. The conference call. The ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voice mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Make your business phone mobile with voice mobility. Comcast business. Built for business. In london. 6 30 here currencynas foreign reserve has fallen to a fouryear low. 2015 asng a slump from the peoples bank of china works to shore up u. N. And oili arabia minister the Saudi Arabia Oil minister talking with his counterpart in venezuela. North korea launched a rocket over the weekend. Clinton stopped short of assigning an outsider. The broncos have one super bowl 50. Won super bowl 50. Paid cbs about 5 spoton for a 30second during the broadcast. Anna thank you very much. Many markets in asia are closed for the Lunar New Year, year of the monkey. Caroline we are seeing risk sentiment picking up a little bit. Its really does seem to lead the market higher. We are seeing japan stocks trading up today. We are seeing wti crude, brent crude picking up. Weve got that socalled successful set of meetings on sunday between saudi arabia and venezuela. Countries really trying to galvanize some sort of agreement that they will stabilize the oil price. So we see the oil price up. This is the amount of thats being put on oil completely at odds. They dont know which direction it will go. They are at records high record highs. The long contract is this white particular line here. Short contract the orange. So a bet we will see oil prices actually rise. This is a record high at the moment. We are also seeing sure to bets reaching a record high. Clearly showing the market doesnt know what to make of which direction the oil price is going to go. But they are making big thats at the moment. On cftc. Ecord highs we have not seen them this high since 2006. The equitytalk about side of the equation. Caroline this is an interesting european stock story and asian stock story. , the bets super c put on by the likes of muddy waters, the shortselling company. They are trying to show that they are worried about the death levels of the casino. They have been using accounting to understate their debt. The stock price up 9 this morning as they look to be selling to the richest man in thailand at the moment for 3. 1 billion euros. Up goes the asian stock in this story. Up goes the likes of big c supercenter. I lets look at the debt on the backs of casinos and this is casinos debt level. Worthgot 9 billion euros of debt. This deal cuts the debt by half. We could see a downgrade in the overall concern ratings when it comes into the debt level held by the french retailer. Anna thank you very much for that. Lets go to japan now. Workers got a pay raise in 2015 dampeningincrease, bank efforts to stem inflation. Lets get to james mega in tokyo. Raise of morepay than 1 since 1997. Thinkakes bank of japan that companies will listen to them in 2016 . James i dont think there is anything really the market would suggest. Been out for the last 18 months sang companies should raise wages, companies should raise wages, companies should raise wages. Its not happening. There was a little bit of a spike last year of 0. 9 , increase for workers. Profits with record japan has been having because of thatconomics program, benefit has not been accrued by the workers. Consumption spending is not strong in japan. The economy contracted again in the last quarter. Most of that was down to week domestic consumption because people are not paid enough. Anna if you add the Government Central bank calling on companies to raise wages, what more can they do . Directly, apart from the bully pulpit, going out and saying we would like you to do this, there is not a they can do directly to affect companies to increase rages increase wages other than passing a law that the government is not going to do. It tips composed of the stock of companies that raise wages in investment, they dont even exist at the moment. Hard for the boj or anyone to say it will be effective policy to ensure to encourage Japan Companies to boost pay for their workers. They got a 1. 9 pay increase last year, which was nice. The boj could double down on it easing, whether it is quantitative easing or qualitative raising or the new interestrate, whether that i think what we have seen is them a wild the boj has boosted profits of Japanese Companies and weekend the yen, that has not benefit japans workers. And an increase isnt going to have a different effect. Guy thank you very much. The whole construct of abenomics was lower the yen, drive the economy higher, drive the exports. The Companies Get more money. They get more pay raises. We are not looking at that working in the equation at the moment come our way . Matt you are being a little generous. It worked ok during the expansion. What we saw last week very clearly is that, as the world goes to risk off, these tools seem less effective in the short run so they need to do more. Anna what does doing more mean . Does that mean increasing negative Interest Rate or a new tool for the toolbox . S in this case, it means a little bit of talking, a little bit of action, and a little bit extra buying. Perhaps there is a next announcement. We think there is more of an effect coming down. Guy if we look at the movement in the yen, it had its biggest weekly rally since 2009. Its definitely got everything working against the bank of japan. Viewstually shifted your in your total Asset Allocation. You are closing your overweight position on japanese equities. Just take us through the construct of what you think perhaps some of these moves have been redone in the equities market. if the equities are going to move up, we will have to have the bank of japan move. If they are going to be effective, they will have to see the red sea move. See the currency move. The currency has to move before we can say such a condition for the equities to do well. We see the same small thing today. The yen weakens a little bit to the dollar, probably helped by the fact that oil is not going to. Lockstep. How much do you see this trend toward negative rates as a real theme of 2016 . Is this something that is going to spread . We have the g7 already half on negative rates. Mads it has spread so much already. We see it as a theme for the year and we expected to continue and the local banks and the eurozone will move further into that territory. There is a tendency over the recent many years that Central Banks like to do what other Central Banks have done because it is uncharted territory but not as much as uncharted territory. Guy with the uncharted territory and the concern about deflation, the bond markets are roaring ahead. I want to get your view on that. Ive used this a couple of times, this bond index. We look at sovereign bonds at the top of the screen. If we change that to year to date, you begin to understand i mean, it puts equities to shame. Youve got a 3. 59 return. Nearly this, the u. K. , 4 . Pacific rim bonds i mean, those are quite mega returns in terms of the first six weeks of trade. Mads it is. Sometimes finance is quite painful. Now they have given good returns. Of course, if we get risk off, we took some equities off and bought some highgrade bonds. Sometimes you need to stabilize your portfolio like that, even though on a historical perspective, this looks a bit crazy. Anna what about the highyield stuff . Mark the end of last, the state of the shale drillers in particular in the u. S. , how much that spread away from that sector . Year we closed we are overweight in u. S. Highend overweight in european highend yield. That the big fear is that the spreads from highyield into investment rate and it spreads like a virus in the system. We think we are approaching quite interesting territory in terms of highyield. Guy just as you said those words, i was thinking about the big short that i went to watch a couple of weeks ago. Anna i know where you are going with thisanna . Guy what went wrong with my life in 2007 and 2008 . [laughter] so this is your moment to call the negative feedback loop in terms of highyield into the real economy, into the how grade come a yes or no . Mads if you look at what goes on, these people are right but the market is not moving. What we see here is that the market is moving in highyield. 70. U. S. Is trading below you go to the film and you see the man waiting on the floor and say why is my position that yielding anything. Anna you dont do that, do you, mads. Mads i dont lie on the floor waiting for my positions waiting to move. We are talking about things nobody thought should fall back then, except for these geniuses. Here, we know it is high yield and it has moved. That is the big difference. Anna great to see you this morning. Yellensext, janet highway or act. She certainly has a big act to deliver high wire act. She certainly has a big act to deliver. Me beforeprepares to congress. What it means for march and the rest of the year. Anna welcome back. It is 6 47 here in london. The ceo of the total prices will stay between 40 and 60 for 10 years as the china slowdown and u. S. Shale create a fundamental shift. A 40 tol probably see 60 type of band. At Something Like 60, you will bring back on some of the oil fields, which will probably go out. U. S. Shale, huge amounts of discussion about that. I dont think the audience understands quite all the economics. Oil will of the probably be shot down in the next year or so because it is simply too low a price. Some of it could come back. Mark could do far he cutifani faces investors today. And casino sells to tie grosser big c supercenters. It should be somber in cap down today. Jesse is chasing all the stories. He joins us from cape town. Set the town. Dividends. Ng about commits to that dividends. Jesse thats right. The mood is somewhat somber here. Largestay, the worlds mining profits kicks off today. We will hear from Mark Cutifani. Investors will be keen to hear from him. And the keynote speech this morning from the mining from south africa. Anna slightly more beat notes coming from some of the gulf minus perhaps . Jesse yes. Gulf miners perhaps . Jesse yes. Some are somewhat immune. Bey gold miners will speaking a more upbeat tone. Speculation around consolidation in that industry. We could see more deals in that space. The one shining light for investment bankers. Anna thank you very much. Guy lets turn our attention to the main event of the week. It is Janet Yellens testimony before congress. It is a two day event. Yellen has to do what . Anna it is a delicate balancing between confidence in the economy and acknowledging the increased risk from abroad. So what will it mean for the fed rate . Guy i thought what we would do is check in on bcws. This is our bloomberg mishmash of all the major currencies. Correlationoomberg weighted index. This is what fascinates me. This is the dollar. Sinceggest weekly drop 2009. The aussie dollar has its own set of issues. , what look at the trend you see here is the question. The fed has hiked rates. The fake trade was dollar long. Rote it down three dimes three times wrong, wrong, wrong. The dollar is not going to mean strong as the fed raises rates. They did and the dollar fell and it is a fragile consensus. One man will make us will help us make sense of the fragile consensus. Where are we in this . The fed raise rates. Its a consensus trade. The whole world is longterm i love what Deutsche Bank says. We have reached the divergence. That is my phrase of the day, peak divergence. Mads i wish i knew what that means. Strikeis going to try to a balance. We think the market has maybe moved a little bit too far. We hit the dots say theyre going to do more. And the market saying they will do nothing this year. We might come out in between. Maybe to like spirit she is probably not going to take march off the table. Four is probably also not happening. Trendnk there is a clear on the dollar yet. It could strengthen a little bit. They could go to a. 05 to the euro. But we dont see a big move yet to 1. 05 to the euro. But we dont see a big move yet. Anna if the fed does follow the the dollar goes higher or do you think that is all done now . Mads i dont think the fed is going to do all they suggested earlier. With a came out and said that things look different. That means theyre considering the dots. It willdo all of that, most likely be a bad situation for the world. And the dollar could go off could go up on a risk off trade. They are rebalancing their own expectations and we think they are rebalancing the global situation. They are reconsidering that. She needs to find this balance going into it so that she keeps peoples fate faith in the economy and the fed high. Guy lets talk about the language. You touched on bonds. Lets talk about equities. Start tothe worst trade since 2008. We surveyed 21 analysts. 32 of them are cutting their s p forecast. Is the earliest capitulation it is the list capitulation. Do you join the capitulation . Do you lower your view . A few years ago, we had a long period of long u. S. Assets. Lasser, we went neutral. This year, we are neutral on equities in general. He think the euro will end better. It is too early technically to build up risk positions for real. If you are behind on your allocation come a few major wealth in the last few years and you do not have your strategic allocation, this is a good time. But in terms of earnings, earnings are coming in lower than we would have expected six months ago. So we are lowering them a little bit. People are probably saying it will be q2 earnings which will show the progress and u. S. Earnings. Q1 in thet be balance. Fourth quarter coming in in the moment. People are pushing it back in the moment. U. S. E not ready to go equities yet. But we think the euro will start better than it started will end up better than it started. About the components of the job number on friday . Mads it has taken a long time and they are not going up in the u. S. As much as people would have hoped five years ago. But they are going up further than they would have hoped five days ago in the sense that we dont want wages going in without growth. That is really dangerous. So that is probably hoping to sell off the market on friday. In the rate in the long run, i think this is a stabilizing factor for the economy. Guy would you buy inflationlinked bonds . And doom laden. Theres no inflation. Oil is on the floor. Gettingr going off our knees. You are doing yoga. [laughter] what is the risk of some . Nflation 2016 mads the worst thing that can happen to the worlds with we have a lot of inflation. I tell my colleagues, if anyone can see signs of sustained inflation anywhere, bring it to the light. It would be nice to have some sustained inflation in this environment. Anna may be 50 to 60 oil for 10 years would not be so bad. , until we getgo the European Equity markets up and running, we will get the ran gold earnings spirit they come out at the top of the hour. The Company Stock has rallied 28 . Anna so a real sound at when it comes to the gold business. We will be speaking later on to the randgold ceo. We live in a pick and choose world. Choose, choose, choose. But at bedtime. Why settle for this . Enter sleep number and the ultimate sleep number event, going on now. Sleepiq technology tells you how well you slept and what adjustments you can make. You like the bed soft. Hes more hardcore. So your sleep goes from good to great to wow only at a sleep number store, right now save 50 on the ultimate limited edition bed. Know better sleep with sleep number. Guy defending the yuan. It is a new year in china. Traders take the week off. But the peoples bank of china is hard at work. Reserves tumble. The Worlds Largest Energy Trader says low oil prices could sit for a decade. Ceo withinhe vitol the hour. Volatility knock the fed off its rate hike path . Anna welcome to the program. Break. Some numbers to it stayed kind of quiet. Were going to talk about rand gold. We have miners down in south africa. Y are saying they are their production costs will be in line. So no big changes. And the cost line, dividends so Many Companies taking dividends in their resources sector. They are proposing a 10 the annual dividend, setting themselves apart a little bit from the commodities index. It is not the only way, in fact. If you look at the share price of randg we seeo itld outperforming the gold price and the index,. Manus that is definitely looking the trend. Yes, they were defending their dividend, but they were offering scripts. They offered a script to credits race. Weve got european agree markets they offered scripts to credit suisse. Weve got European Equity markets. It was a little bit of a bolster. We have European Equity markets rising. The paris market up by 20. U. S. Equity at the top of your screen. A big week for janet yellen. She will set the tone on what happens next in the great big dollar story. Anna we saw the jobs number, particularly the wages. Stronger than the market expected. The dollar did climb, the dollar ignorant tests the dollar index above 97. And a lot of gain this morning. S says it is too early to take a conviction piece on the dollar. It is pretty much a risk on day. Course, the karen yuan, that is declining. The dollar higher on the geopolitical concerns coming from north koreasouth korea over the weekend. Chinas currency reserves have fallen to a fouryear low. Continuing a slump since 2015 as the peoples bank of china sought to shore up the yuan. The ceo of vitol sees a decade of low crude oil prices. Willaylor says that prices stay between 40 and 60 for 10 years. Chinas slowdown and u. S. Shale trigger a fundament of shift. We do imagine a band. We would naturally see a 40 to 60 type of band. We do believe that at Something Like 60, you can bring back on some of the oil fields, which will probably go out. Shale, huge amounts of discussion about that. I dont think the audience understand quite all the economics. But for us, it is clear. And a lot of the oil will probably be shut down in the next year or so because it is sibley too low a price. Some of it could come back. Anna meanwhile, the Saudi Arabiaan Oil minister says he has held successful talks with his venezuelan counterpart on ways in cooperating to stabilize the crude market. But he did not mention what steps to shore up the crisis. North korea launched a longrange rocket over the weekend. The Denver Broncos have won super bowl 50. Ron miller was named the games most valuable player. About 5rs paid cbs million for a 30second spot during the broadcast. Manus now i know what i have to try and reach. That is what i have to live up to. In the meantime, lets talk about a risk on day this monday morning. Caroline hyde has anything you need to know in terms of market moves. Caroline connan we are seeing a shake often risk aversion. Youre seeing the japanese stock. Nasdaq futures after a little day in u. S. Trading, digesting the labor numbers. Does that mean we will see a rate hike perhaps in december . That is currently the possibility. That is feeling the dollar the lowsicking up on on friday. We are seeing a rally in asian stocks because the yen is weaker. Japanese stocks rise. Indonesia, kong, singapore, all of them are closed for the Lunar New Year. This is a great imap function on bloomberg. Have 1. 1 percent. But telecom leading the charge in japan. Industrials higher. The only area that is lower is energy. Energy down by laquan percent, interesting when you see oil pickup from its lows today. Great shot i wanted to show you on the bets being made in oil. Complete confusion. There were record bets on oil. But both on short bets and long bets. Is a shortnt, this contract. Bearish bets on oil picking up. Bets,so seeing long thats on oil rising, rallying up as well. This is the highest amounts on bet we have seen. Ever since we have been monitoring it since 2006. Clearly shows the confusion, but a willingness. Rochers making a lot of money printing tickets a lot of brokers making a lot of money printing tickets. And decline in the fx reserves, but it wasnt as bad as december. There seems to be a little bit of relief or we are waiting a substantial market to give us the correct interpretation . One concern is that we shouldnt overplay this lower than expected drop. 100 billion is not very far away from decembers record. 100 and 8 billion. Of 100ad seen a drop billion. It would have wiped out more than half of its foreign reserves. A could have wiped out all of indonesias foreign reserves. All of malaysians foreignexchange reserves. What we can read into this figure, although slightly less than expected, the thing is that the pressure on the currency continues unabated and it will probably come probably continue in the short term for now. Anna there are others echoing your concerns. Bank reading from rebel this morning. Rabobank. Ebel how does this come to kate with china is to do at the moment . Robin i think youve got the right angle here. Is, if happening here you look at chinas Foreign Exchange reserves, it is close to 4 trillion. 3. 2 3ill drop to trillion. How long can it continue wasting reserves. N exchange the whole problem with this, the whole conundrum that china is facing now is that should it currencyto support the or should they focus on allowing a slight depreciation of the currency and help the economy, which is growing at its slowest pace in 25 years. This is located the pbocs outlook. Off for some may may opt for some fiscal changes. On capital large. They have been doing in the last five or six months or so. , it isput in money pretty much a one way they now. It is difficult to take money out of china. It is not extremely rosy picture as it. And the currency will probably continue to decline the next three months or so. Anna and all of this in the year of the monkey. Robin, thank you. Yeardnt get the lunar new off. Manus you read too much about the Lunar New Year in the monkey. Our next guest says china will continue to slow and it is still possible, unlikely, that the world will enter recension this year, 2016. Peter its amazing how many people are writing about the be,ibility, small as it may a recession in manufacturing. Introduction to use about the prospect. How will i know we are in restrict in recession . Some locally say we are already in recession in the united kingdom. There is always change going on in any economy. Creative destruction, some industries are in recession, as you say, manufacturing around the world is extremely weak. In many cases contracting. That doesnt necessarily mean that economies overall are in recession. I think for that, you have to look for indicators like the yield curves. U. S. , it hasf the been an extremely accurate victor of recessions one or two years later. Yield curves around the world are still positive. Ok, they are less less positive. They have been flattening. They are still a long way from the level where you would say cranky. Manus you looked at some empirical research. 1980, 1990, 1991. Peter i think it is a very good benchmark. Recessions and generally start because Central Banks are trying to restrain economies. Inflation pressures are too high. A economies have reached the point where, at full capacity. On both of those counts, you are inflation pressures that are very low. You are looking at economies that have a long way to grow. Has the ims has an applet gap. The point is it would be an extremely unusual place for a global recession to star. Yes, there will be one at some point. Anna what do we need to stop that from becoming the case . We just need some stability. Stability in the china story, in their currency, in the oil story. Does that help to sustain this recovery . Peter yes. I think the way markets have been reacting is, in many ofpects, still a function the psychology that you have in markets. Investors are still very nervous. A number of people i meet in my travels are terrified of a repeat of 2009. They give you very good insight into how vulnerable, how susceptible investor behavior is to these bouts of panic. Equity markets are always more volatile than they should be if you just look at Dividend Income streams. In that respect, yes, you could have recessions that would cause earnings to fall a long way. As you suggested, what we need to see is just evidence that we are not seeing a collapse in growth. Manus these are financial conditions. This is one of the functions we look at. This is the u. S. On the bloomberg and u. S. Financial conditions, if we look on the far left, you can see we are beginning to dip into negative territory. This doesnt bode well, doesnt . Peter we think the u. S. Is an expensive market. At pricetobook values, which take out the effects of whether earnings are above or below trend. Other markets around the world are all less than two. In some cases, a lot less than two. In the case of scope for profit growth, the u. S. Does not have much. In other parts of the world, there is still a lot of scope for profit work. We are fairly sanguine on equities. More on oil. , manus we cant get away from it. We will have a lot more this morning. It is an exclusive interview with the ceo of the Worlds Largest Energy Trader. They said they have already bought oil from iran. Anna lets get the Bloomberg Business flash. Caroline Mark Cutifani will be meeting with investors today. The plan im division says it is theending dividends Platinum Division says it is suspending dividends. Is buying casinos for one billion euros. Volkswagen says it will publish its annual results as soon as april and may hold a in earlyers meeting june, four weeks later than originally scheduled. Thank you very much. Votp exclusive interview, vitol ceo says they have already bought oil from iran. It into brings back a little bit of extra supply. Not a huge amount. I dont think there i think there are some inevitable achieving problems. Its 500,000 barrels a day, but it will take some time. It will be spread in our view around a lot of the big systems in asia and europe. It obviously does add to the supply weight. It will for a time. But the market will be able to deal with it. Much oil do see iran adding to the market by the end of the year . I think the industry sees about four to 500 coming on by the middle of the year. Probably about six or seven by the end of the year. I think it depends on the iranians being able to get back moving smoothly, financially obviously. Looking for cash and prepayments, a lot will depend on all the money they are of comes back and they will invested to get these flows going again. Reporter you have got some oil from iran yet . Yes, we have. Business asuch normal. They are very sharp. There are very good. They havent changed a lot. We will be seeing them this week. We will carry on the discussions that we dropped off a few years ago. Reporter does that mean that you are the first to get in post sanctions . No. Reporter how did you put off . A lot of companies talk about it being challenging to actually because of the very sanctions, because of the financing issues. Just italyicult to legally and all of that stuff to arrange . Not especially. We, like everybody else, did prepare some work. It was clear that it was coming. We talked to them about what would happen once it did come. So we were relatively ready. But i think others are ready. R people reporter wouldnt be surprising. Is insurance an issue . Organizing financial flows and shipping is not easy. But it can be done. Vitol ceo was the talking about 40 to 60 oil for the next decade. Manus it is 40 higher than where we are right now. At nymex crude, up three dollars. You got copper coming off a little bit. Nd gold we will have the ceo later. Anna interesting to see gold trade later. It is actually trading higher in the euro has spurred session in the johannesburg session. The conference is taking place in south africa this week. Lets talk a little bit about the dividend environment. A story out from Bloomberg News this morning that talks about another sign, a tough time. So we see dividend cups. This is the number of businesses cutting back on their dividend in 2015. Is this a worrying sign to you . Peter certainly a worrying sign for the markets. The markets are telling you, not just in the last couple of months, but last june when markets generally peaked. That we have generally seen in markets. That it is telling you people are at about profits, about dividends. But they often tend to be too worried. Markets tend to suggest that dividends will completely collapsed. They will be wiped out for a euro to parent and that is never the case. If you go back to 1967 thing in the u. S. , there had been seven recessions, seven bear markets. And in not one of those did drop . Ate people just ignore the fact that dividends have a remarkable ability to recover. Companies have this extraordinary ability to adapt to their environment. They can maintain dividends by cutting out payout ratios, if earnings are falling. They can reduce workforces. They can do any number of things. Think equity Market Investors generally appreciate that. Reflecting just how few of the Big Oil Companies begin to adjust. The 9 ory disbelieve 10 , that level of skepticism. You said there were some markets that offer great value relative to the u. S. Where are they . As year ago so we initiated this position. We were conventional. I dont think we are now. We are overweight euro. Unemployment is still well over 10 . Therefore Monetary Policy will remain loose for a long time and that will begin for equities. Anna thank you for joining us. From anna and it i. Futurest equity indicating a little bit higher. Crude is trading higher. The markets seems to be taking it in stride. We leave you with on the move. Welcome to on the move. We are counting you down to the european what we are talking about today. We have a great interview. You are not getting this anywhere else. With iancoal talking taylor. Out of thats conversation on where oil is going. A mining conference in cape town. A big one. They are talking about consolidation. We will have that conversation and take you live to south africa. Barclays should be broken up. That is the call of one analyst. We will walk you through the logic of why thiba