Transcripts For BLOOMBERG Countdown 20160906

Im anna edwards. Im rishaad salo. Anna fascinating markets this factor we increasingly in less chance of a fed Interest Rate hike in september, that seems to be many of the equity markets are basing their move on. On throughnvestors where we have been. The asian stock market picture. We have the hang seng up by 3 10 of 1 . The asiapacific up by 3 10 of 1 . We have the aussie dollar up by half of a percent. The Australian Dollar increasing even before we got the Interest Rate decision, increasing for a sixth day. No change from the rba. We will discuss that a little later. 1. 9 as markets weigh up this commentary and agreement of sorts between russia and saudi arabia. We heard about it in the middle of the european trading day, but markets talking about those efforts to stabilize oil prices. 1326. Ice is stable at lets get the first news. The Australia Central Bank has kept Interest Rates at hold as they await the u. S. Federal reserves next move. The board left the cash rate at 1. 5 . The central bank has cut twice in the past four months and see little chance of further easing until after the release of Fourth Quarter Consumer Price data. Alsoank of japan should wait till after the u. S. Federal reserve decides on his this rates before acting on itself. The Economic Advisor to shinzo abe said that. It overshadowed the stimulus at its policy meeting. The fed hours later decided to keep Interest Rates unchanged. Bid for the second time. It is prepared to offer 127. 50 a shore, a 19 premium. If the deal goes through, it will create the worlds biggest producer of pesticides. In july, monsanto rejected the bid. Barack obama has canceled a meeting with the president of the philippines after the philippine president released an expletive and the war on drugs. Andas due to meet obama offered the u. S. Leader some bolded vice. Advice. I am a president of a sovereign state. We have long since to be a colony. I do not have any matter than the filipino people. Do nott be respectful, just throw away questions and statements. The man responsible for negotiating britains exit from the European Union says there will be no delay in i leaving. U. K. Id the people of the included clear instructions to leave the eu. The Prime Minister has made clear there is no attempt to stay in the eu by the back door, no attempt to delay, frustrate the will of the people. No attempt to engineer a second referendum. Because some people do not like the first answer. Tooline the airways plan have conversations with rollsroyce with more than a dozen flights last month finding broken turbines on three aircraft, according to people familiar with the plan. A formal conversation has not been presented yet, but it could be purchases of parts. Global news 24 hours a day powered by thousands of journalists in more than 120 countries. Im Caroline Hyde. This is bloomberg. Anna thank you. Lets get to our first guest this morning. We are joined by philip shore. A good morning to you. Im looking at the oil price, up this hour. 45. 231. We had a fairly decent day yesterday. The oil price had a bit of a song and dance as we heard from the russians and saudis. How substantial the you think the commitment they made was yesterday to at least coordinate their efforts . Philip good morning. Well, we have seen oil prices slipped well below the 50 a barrel level. I think some news potentially on wa going to happen were pretty cynical of a comply agreement actually causing a freeze in Oil Production globally. We might get temporary shocks which helps the markets. We dont actually see it happening. Prices goay see oil towards the 50 a barrel level. Are we likely to see any sort of freeze by opec member countries or nonopec member countries . I doubt it. Rishaad great to see you. Price end of the day, the pressure to the downside. We have iran wants to get to about 4 Million Barrels a day by march. Nigeria coming on stream. Who is this who is to say iraq wont join . Where do we go . Philip absolutely. I think it is a good reminder that what we saw in terms of the collapse in oil price, particularly from 2013, was not a demand story. Unless we get the unlikely event of countries plotting together and limiting their outputs in a more effective way we have seen others do, then supply will continue to be the least factor on pricing. Anna what do you factor into your models and the changes we will see in inflation as a result of the going price data oil price because going price because dad oil price because we will see inflation be issued. Going to bes what happened already to oil prices. A sharp decline in the oil price around the turn of the year will drop out of the year as account of inflation. We will see those headline numbers increase more increasingly at the end of the year. As time rolls on beyond next prices it is not a confident view is that we will begin to see demand catch up with supply. That should mean oil prices should gather a little bit of steam beyond 50 a barrel, 60 a barrel and that should put modest pressure on inflation as well. Manipulationword looking at the oil price, how much does opec need russia in order to have more control of the oil markets and does russia need opec as much as opec needs russia . Philip im not sure saudi arabia being traditionally the swing producer, any one country will make a vast amount of difference to the oil price. The exceptions would have been the United States given the big rise in supply over the past few years has come from the u. S. Shale Oil Productions. The u. S. Is the worlds biggest producer now. Sure, if you look at the individual country situations such as russia, such as iran or iraq perhaps, that will cause it over the short term as well. Rishaad the thing is you mentioned the u. S. The new swing producer and is in shale puttingthis above 60 a barrel . Philip in terms of swing producers, saudi was not only the Biggest Oil Producer historically, it was actually willing to limit its production. That is a very difficult situation from where the u. S. Sides itself in the moment. I would not call the u. S. A swing producer even though it is the Worlds Largest supplier. Shale limit the oil price going up beyond 55 a barrel . It may well in the shortterm. As providing that we get global 4 over growth at 3. 5 , the next five years, it should demande supply and dynamic changes and you may well see Oil Prices Hit the 60 level. It is not completely out of line with what the futures market is suggesting. Anna you are obviously expecting them to do the heavy lifting in order to bring supply and demand back in balance. What underpins your demand expectations . Why do you think oil demand will increase and that will apply pressure . Philip im not so sure i will be optimistic to call it heavy lifting. Most analysts would call Economic Growth globally between thre 3 and 3. 5 would be below par. We see the very longterm average which was before china went before its growth surge 10 years ago. What we do see continued growth from emerging markets. We know china is slowing down and a lot of that has already happened. We also see to a certain extent u. S. Growth beginning to gather a little bit of momentum in terms of the eurozone picture. That is something that we expect. There are no fireworks in terms of global growth, averaging 3. 5 . It is not impossible that you actually see global Economic Growth of 4 on occasion. Anna philip, thank you for joining us. Philip shaw stays with us on can countdown. In less than an hour, factory orders from germany. The german finance minister will formally present his budget to parliament. That is at 9 a. M. U. K. Time. An hour later than that, we get eurozone gdp. The Economic Outlook and take questions in reno, nevada. Up, bayers bid for monsanto. We will discuss that. The rba Standing Firm in its rates, but is the strength here tuesday . We will have that. Also the difference between moscow and being derailed by iran. This is bloomberg. Rishaad this is the scene of victoria harbor at the moment. It meant we were going between gains and losses, up by one quarter of 1 . It is 60 minutes past 1 00 in the afternoon in hong kong. Lets get the Bloomberg Business flash with Caroline Hyde. Caroline bayer has up its bid again. Senr monsanto it will offer 125. 50 a share. If the deal goes through, it will create the worlds biggest producer of pesticides. In july, monsanto the allied the initial bit. Agreeing to big deal with airbus. A320 planes. Expand in a lowcost market that has grown 20 annually in the past three years. General motors has settled the forl two bellwether cases ignition switches, of hurting one set to begin next week. The terms are confidential but the injuries were caused by switches that could be turned to the opposition. Position off position. He is the head of Investment Banking in singapore. Andas 10 Senior Executives plans to hire 10 more at the end of the year. That is your Bloomberg Business flash. Anna thank you very much. Lets move on to all things australian. The central bank has kept Interest Rates at hold as they await further inflation data and the u. S. Federal reserves next move. Thets final meeting, governor and the board left the cash rate at 1. 5 as forecast. Lets go to michael in sydney with more details for us. Good to see you this morning. Or evening perhaps. This is Glenn Stevens last meeting. What court of should sort of shape is he leaving the economy for his successor . Michael it is a real contrast in fact. If you look back at his 10 years, the best example is the inflation rate. 2. 5 s hit the midpoint, between the 2 and 3 range the rba set. It is almost a perfect score. Unemployment at 5. 3 . Wage growth is 3. 3 . When he hands over is inflation of 1 . A cash rate at 1. 5 . Toy little rate ammunition tackle the inflation problem. Wage growth at 2 , a record low. There is little pressure in the economy. Very unusual situation for australia and limited ammunition in the gun in terms of rate. Quite a complicated task. Him withit also leaves exactly the same Exchange Rate than he had when he first entered office. The reserve bank continues to watch the fed and the u. S. Economy. It is a big deal for them, isnt it . Michael it is. Its huge. It would be fair to say the past couple of years, the rba as an crossing its fingers, hoping for the fed to start tightening. You can imagine their fingers are fairly blue right now. The fed staying on hold, only having that one tightening last year, basically means a lot of investors looking for yield in the dollar. Even at 1. 5 , it still looks ok. The dollar is as high as it needs to be. Ammunitionittle rate left, the dollar is the best avenue for stimulus. Traditionally, currency will fall as well frost really. That is their best bet for recovery in terms of its economy. That is indicated by the fed staying still. It is what they dont talk about a lot but it is very important for them. Anna thank you for your analysis. Michael heath joining us from australia. Philip shaw is still with us. Lets talk about what is happening in australia. We saw the rba with no change in their Interest Rate overnight. We were hearing from our reporter in sydney that one of the issues is to move the dollar around. He does not have much ammunition in terms of reducing Interest Rates and tackling inflation. Philip that is right. We were not expecting a movein Interest Rate today. Point cute a 25 basis from the rba last month. We are in wait and see mode. We are not totally convinced the rba have to move again. We will be watching the Exchange Rate but looking to see if investment remains weak particularly as well. Looking at the Housing Market situation too. There is a growing risk that we get another easing from the reserve bank. I would say globally, this is a positioned a lot of Central Banks find themselves in. If anything, the rba is in a slightly better position to have some room in conventional Monetary Policy. When were looking at other economies, we are increasingly talk about fiscal policy as a potential stimulus. That is something that the Australian Government could have if it needed to do so. Rishaad i think it is a common problem which was highlighted a year ago, limiting Monetary Policy. It is being echoed globally. The thing is did they get it all wrong in the sense of relying too much on Monetary Policy to begin with and not doing enough on the fiscal side . Know, well, you australia tends to have a tight fiscal ship. The downwardat forces are on the strap on the israeli and economy on the mediumterm. All the australian economy on the mad mediumterm. Australia has not required stimulus overall and Monetary Policy has done the job. I think that will remain the us of any holocene move policy move to increase inflation or get the economy moving quickly. For the time being, i think as we are watching a whole host of different economies, fiscal policies, you cannot rule out in the mediumterm if not the shortterm. Anna we increasingly here calls economical actors, leaders about the need for physical action. Weve got the fed and boj meeting later this month. You get the sense that many Central Banks around the road want to wait and see what the fed does in september, but expectation is only a 32 chance factored into the market. What are your expectations around the fed, and should they be none the wiser come the end of september . Philip i suspect they will be none the wiser. Our view is the fed will not move in september. We think there is enough ammunition for the fed to hold its fire at the moment. Enough uncertainties with economy and it probably does not want to move. A couple of months away from a big president ial election. Members willmoc say the election is not a factor in our decisionmaking. Typically, if you look at a longerterm analysis, the fed has tended not to move ahead of election. I think it will remain the case now. There is another meeting in november as well, a few days before the president ial election. View is there will be a alignment that will justify this kind of move but nothing until then. Rishaad there was a lot of talk from officials, voting members and some of them non, and that really muddied the waters. The point is do you think janet yellen needs to rein in these other members . Sure it is not effective to rain the other members in. She will try to build some kind of consensus between the various wings of the fed spectrum. Of course, one of the big problems she has been trying to do that is there seems to be in increasing disparity in views among fed members, not solely over if there should be a september move, or 27 m 2017 move, or what this would look like over the mediumterm. That is pretty tough consensus to build. You may see its in september but nothing in november. Anna philip, thank you. Philip shaw stays with us on countdown. Later, we will talk to the former u. K. Banking minister. When we come back, we will talk oil. This is bloomberg. Anna welcome back. You are watching countdown. Here is a live look at the sydney opera house. The aussie dollar up against the 0. 5 dollar, up around before the rbas decision. Subsequent to that, it we are still stronger on the aussie dollar. The rba leaving rates unchanged. A new edition of daybreak is now available. At us take a closer look some of the top stories we are looking at. The cover story is they are upping its bid for monsanto, for the second time. 27. 50 127. 50. We will see if we get a pop in the monsanto share prices. They are comes back with a sweetened approach. The revenue from raw materials. Top banks sliding 25 for the first half of this year. In at leastowest half a decade. Is focusing on u. K. Retail sales. Which dropped in august after a 1. 9 jump in july. That is the weakest performance since september 2014. Could this be one of the first week spots in the consumer picture. A lot of the survey data around business data is showing weakness of the consumer has stayed resilient. Continues. If that the man negotiating britains t of the European Union david davis said the people of has given given clear instructions to leave the eu. The Prime Minister has said tuesday. L be no effort no attempt to engineer a second referendum. Some people did not like the first answer. Philip. Ining us now is let us come back to you on the subject of grexit and the u. K. Economy. We have had data that has taken people by surprise in terms of its resilience and the u. K. The services pmi number did that. What is your assessment of what is really going on here in the u k economy . It is a very confusing picture. With respect to the surveys, i think we would point out that the july survey across the range we very weak indeed and what have seen more recently is a rebound. You have to take both months into account. We real activity picture are less concerned about retail sales and Consumer Spending generally in the short term. We think the jobs picture has not changed. Interest rates are lower. Consumer confidence may have split from before the referendum vote but the fundamentals are still suggesting that Consumer Spending and further growth will remain firm. It was weaker than we thought, the pmi but the numbers are volatile on a month to month aces even in normal times. We are more concerned about the pictured next year as inflation rises which will erode the real purchasing power of households which means we think Consumer Spending in real terms will slow down. We are concerned about this investment in the short term. The slowdown in the u. K. Economy that we expect to happen in the second half of this year will primarily be due to corporate spending. Is it the quiet before the storm. Next year you have concerns there. A lot of and it dental anecdotal evidence going on. They have a lagging effect. Is that what you are talking about . Absolutely the fall in the Exchange Rate. Flex int a substantial the next few years which means and riseices will rise in terms of inflation. Unless we see compensation in wage increases from firms, then Household Spending growth will slow next year. That is a firm view we have. Before then, we would expect Business Investment to slip because of the uncertainty over trade access in the longer term and that will result in slower gdp growth in the second half of this year. In our view, it is an uncertain picture. It is not completely impulsive not just the eu but other countries as well as a continue investing. That is the central view we see a slowdown and it is an uncertain picture. Anna what do you think you will be looking for the governor of the bank of england to say tomorrow . Frontl be testifying in of lawmakers and will come under pressure to defend the decisions swift ande to take early action to cut Interest Rates and expand qb. In light of some of the data, will those questions be asked of him and art and is that fair . What what ir to ask would expect the governor to reply is that there are big downsides risks to the economy and it is better to act on Monetary Policy earlier rather than later. Although we have seen data points especially in retail sales, if you look at the official measure, that remains resilient. It is too early to tell for sure that we will not be entering difficult times later this year and early next year and that as a lag. Olicy act if you are expecting a downturn in 2017, then the response of cutting Interest Rates and restarting quantitative easing is justified. Rishaad are you worried . I am concerned. That i am concern is not confident about any forecast. There is a wide range of outlooks. Going around the country speaking to our corporate clients, ahead of the vote, they were saying clearly to me that they were worried themselves about trade access to eu countries and that they could well scale back investment plans and hiring plans if there was a leave vote. That formed part of the judgment behind our view that we will see a slowdown in Economic Growth in the second half of this year and it may not be until mid2017 that we see any pickup at all. Anna economists are not worried kurt they merely express economists are not worried. They merely expressed concern. On course tois join the index in 2018 according to the chairman. Reforms to the stock market are part of the saudis plant to wean itself off of oil. Our middle east anchor joins us from riyadh. You have had this exclusive interview with the chairman of the Capital Markets. What did he tell you about these crucial reforms . Saudi arabia has the largest and most liquid Stock Exchange in the middle east. So far it has not been easy for foreigners to put their money to work here. In the summer of 2015 they started relaxing some of those restrictions. The interest and appetite for prettytocks remains neutral. Let us give you the perspective of the situation. Youre looking at the percentage of shares owned by foreign investments. Investors. It has hovered around the red line. It has not been able to grow that they. Oil price pressures remain. 40 50. Government pressure on the government. They plan to get away from oil, bring in more foreign capital. They come into this latest series of changes which includes moving to a new settlement cycle reducing the minimum threshold from 5 billion to 1 billion. They are also looking at shortselling. They are also considering or planning ahead for the inclusion of their debt capital instruments on the exchange. Plenty of momentum as a result of the oil price pressure. Clearly, a lot of Ernest Ernest earnest momentum towards that. Rishaad this would be a huge boon for them, wouldnt it . And he did notd be around the bush. He made it clear that it is a top priority for them to bring in as much foreign capital ideally as they can. Until they are included by the msci, a lot of funds would not look at them. They are pushing aggressively towards that goal. Here is what he had to add to that. Discussionbeen in with msci and other international indices. We are in continuous engagement with msci. We believe that the amendments that have taken place in the implementation of them early enough toshould be put the saudi market on the watch list hopefully within 2017 and then the normal export will bel be in included. Yousef some of that has to do with preparations for the lifting of saudi aramco which is the worlds most valuable company. The local exchange does not have the kind of depth needed to absorb that kind of ipo. Some of the representatives there will go on a roadshow to to showcase london opportunities there. A lot of Energy Behind those reforms. We will have to see how that is reflected in terms of Foreign Ownership of saudi stocks. Anna thank you very much. Bloomberg markets middle east anchor. Coming up on the program, a bond buying shuffle. Adjust itsb need to qe program. And it an extension of that program in the cards. They are swedens the deal for monsanto but will it be second time lucky for a deal. We discussed. Ic. Bric on br we are learning from the homebuilders berkeley and the other company. Barclays and the other company. This is bloomberg. Rishaad 1 45 a. M. In manhattan. Moving index is 95. 78. This is what we have going on. Let us get the Bloomberg Business flash headlines. Here is Caroline Hyde. Caroline they are has up to its they arehey are bayer has upped its bid for monsanto for a second time. Theuly, monsanto rejected 55 million did saying it was inadequate. Vietjet via jet has agreed to a new deal. Air jet it is keen to expand in a low cost market. Has settled the final two bellwether cases over the ignition switch flaws. Terms of the settlement are confidential but both lawsuits claimed injuries. Everbright securities is said to be stepping up its expansion in hong kong with several top hires from its competitors. The head of banking at singapores bank system. They plan to hire 10 more by year end. Caroline hyde with the business flash in berlin. Let us get to the macro picture out of switzerland. Gdp numbers from the swiss economy. It expanded by 0. 6 quarter on order in the second order. The median export quarter on quarter in the Second Quarter. The actual number came in at 2 growth year on year for the Second Quarter. The estimate was for 0. 8 . We are joined by the head of Economic Research were credit suisse. He joins us now from zurich. Your initialus thoughts about the growth story in switzerland. These numbers for the Second Quarter look stronger than expected. Is this suggesting that the Swiss Companies are Getting Better at dealing with the strength in their currencies . Some companies are dealing better. The overall economy is dealing somewhat better. Many are still struggling. We have an imbalanced situation. We have strength in certain sectors Like Pharmaceuticals and in our export data. But still struggling in areas like machinery. Overall, clearly, the big shock of 2016 has been waiting and that is showing up in these gdp numbers. Anna the central bank has been using negative Interest Rates. Coming in for bad press in some parts. The policy of negative Interest Rates generally are getting negative feedbacks. See this with trying to create any kind of credit boost. With thetrying to deal strength of the currency in the main. Overall it has been successful. Combined with a lot of other things, mainly foreignexchange intervention. Of top moneyinflux into switzerland has weighed in not just because of negative Interest Rate but also because of the situation in the eurozone has why did. The company has quieted. The latest numbers in terms of intervention show it has not had to do that so far and the swiss bank has started to gradually depreciate against the euro. It has been pretty successful. Consumers are shielded from the negative Interest Rates so far. Small deposit holders. In that sense, it has not been really dramatic for the economy. Large Institutional Investors in thed to pay but overall context, it has not been that dramatic. Rishaad at the end of the day, what switzerland exports is in demand. Move . R is the much hard to say. Overall, it has to do with what goes on in the rest of the world, especially in the eurozone. Vote ande brexit regarding the worries over the italian banks. Some appreciation pressure on we swiss franc but overall are in a different situation than 2012 or 2013 when we had so much turmoil around us. And now, things have quieted down and it is natural that the pressure is off a little. A final question from me. What can britain learn from switzerland in its relationship with the European Union in light of what many british politicians have said prebrexit is that we do we cannot have an offtheshelf solution . One thing you can learn from are seeing and we that now in our political discussions is that it is not easy to convince the eu that Labor Mobility should be given up. Is obviously a very important matter internally in the eu because some countries are adamant that they will not allow any restrictions or limits on Labor Mobility. End, there will be some form of compromise. If you look at what has happened since our vote on Mass Immigration in 2014 is the politicians most started with strong statements about imposing quotas and now we are moving to a situation where these limits will be very soft. The keys. E of otherwise, the situation is quite different. For the. K. , the key u. K. Is to maintain the password for the city of london and have open access for the financial industry into the eu. We do not have that in switzerland. The details of the deal will be quite different but i think the overall point is that on this one batter, it is very hard to negotiate or get a softening of position for the time being. Anna oliver, thank you very much. The Prime Minister from Great Britain was on vacation in switzerland so we will see what she learned. Stay with still with us is philip. Us move to what the ecb is going to do next. What is your expectation for this meeting . You have pushed back your expectations for the ecb easing and the scale of that. Why so . We have been expecting an extension of qe2 be announced this week by six months to last through september 20 17th. September 2017. Part of the motivation was that the Inflation Numbers had been disappointing but the mediumterm expectations of inflation had slipped back again and were close to alltime lows, especially the fiveyear Inflation Spot was around 130 or lower. It seems that the Council Members have been talking about the unreliability of marketbased measures and that they are distorted down by technical reasons. I dont know if we fully agree with that but it does suggest that they are more reluctant to ease policy now and therefore we have delayed our call for the announcement on qe until december. We also sense there is less seven appetite to cut Interest Rate. At the end of the day, are things Getting Better . We have had better data out of germany in particular. But elsewhere, when will they be out of the woods . Countries will have to undergo deep structural reform which they have been on unwilling to undertake. Absolutely. Out of the woods is not an expression i am likely to use for the next couple of years but things are Getting Better. The gross the Growth Numbers are modest but respectable credit numbers. The Exchange Rate remains relatively low and at competitive levels not just against the u. S. Dollar against most global currencies. We are expecting some growth. Butdp growth in 2017 structural problems are still very much in their in the euro area. It is disappointing that various governments are refusing to implement structural reforms. Anna philip, thank you very much. Next on the program, we will be talking about what is happening in the oil story. Also, if you are focusing on the European Growth story, we will be joined by the Economic Affairs minister in finland. You may recognize the name because he was also the european commissioner. A lot to talk to him about. This is bloomberg. Anna asian stocks at a oneyear high. On speculation of a u. S. Rate hike this month. Investors weigh the pledge by russia and saudi arabia to cooperate and legalized global crude markets. Bayersweet they are offers more in its did to overtake monsanto. His first appearance before parliament in the role as bank of england. He stands firm. A very warm welcome to countdown. 7 00 a. M. Here in london. I am Caroline Hyde here in berlin. Caroline breaking data for you. German factory orders missing forecast. At 0. 2 for july. It is also seeing a revision to june where we saw a slump of zero point 3 . This read 0. 3 . The market was hoping to see 0. 5 . For your onof 0. 7 here. A lot of significant moves happening in the euro on the back of this. We will dig into this. We are getting some breaking news from the u. K. Corporate. If you see a company reaffirming its view on what will happen with its forecast, that does not seem newsworthy what it does if it is coming in any Company Related to the property story. That is what we are hearing from barclays. They are reiterating their guidance. View ofp reaffirms its 2 billion pounds, pretax profit over three years. Had a negativecy effect on capital. As a reminder, the groups operating in the property here in the u. K. It is a residential and commercial Property Development focusing on urban regeneration and mixed use development. If youre looking at what is skyscrapers, this is not the company to look at what it is interesting in its reaffirmation of its pretax profit forecast over the next three years despite the changes we see on the horizon. Let us bring up the risk radar. Markets. Re on various a fairly strong session in asia. The msci asia in high. Hang seng up by 0. 4 . The Australian Dollar is up wide 0. 6 . It was up before we got the Interest Rate decision for the rba. Then we got a note change decision by the rba. A note change a no change decision by the rba. The russian and saudi arabia and governments what they had to say yesterday about their willingness to cooperate and utilize Oil Markets Even if they do not see a need for a freeze just yet. Let us get the bloomberg first word news. Here is christine harvey. The steam Australias Central Bank has put Interest Rates on hold as policymakers await further inflation data. In its final meeting, Glenn Stevens and his board left the cash rate at 1. 5 as forecasted. The central bank has cut twice in the last few months and traders see little chance for further easing. The bank of japan should also wait until after the fed decides on Interest Rates before acting itself according to an economic adviser to the Prime Minister boj risksys the having its efforts overshadowed. They are bayer has increased its bid for monsanto for a second time. It has offered 125. 50 per share. If the deal goes through it would create the World Biggest producer of the of pesticides. In july, monsanto rejected bay er s did as inadequate. Aesident obama has canceled meeting with the philippine president after that president issued an explicit it an expletive laden message. I am a president of a sovereign state. A have long ceased to be territory. Nobody you must be respectful. Christine the man responsible for negotiating britains exit from the European Union said there will be no delay. Addressing mps in parliament, david davis said the people of the u. K. Had given a clear instruction to leave the eu. The Prime Minister has made clear that there will be no attempt to stay in the eu i a back door. By a backdoor. No attempt to engineer a second referendum. Because some people did not like the first answer. Airways. Nippon following its cancellation of more than a dozen. That is according to people familiar with the plan. The form of compensation has not been decided that it could be for discounts on future purchases or for free parts rather than in cash. Global news 24 hours a day powered by our 2600 journalists in more than 120 countries. You can find more stories on the bloomberg. I am christine harvey. This is bloomberg. Check on youret a markets. David has it all for us. David at the same time, the currency is getting bid up as well. Industrial yet, you are seeing a backlash at the moment. It is worse it is not as bad as it looks. Closing up shop. There is a good bond story out there which is playing out when it comes to financials. This is another decent day in asia. Volumes are decent. Not back to levels of last year. There are a few markets up over 1 . You have india. What is interesting across these markets is that we are pushing towards the higher end. Up so fast, some of these markets may look a little overheated. Hong kong is very interesting. It is the most overheated. It is also the cheapest. Taiwan is above 60 on the are as ive. India is at 69. Quickly, before i go, let me wrap things up in japan. Looking at financials. Up 30 as a group from july. It comes down to the yield curve in japan is steepening and improving the outlook for net interest margins. Have a look at the 10 year jgb. Yields are close to turning positive for the first time in six months. Singleas, thank you very much. Let us talk about one of the big global themes of the week. The oil price. We are looking ahead to what happens in algiers. In the runup during the g20, we at the russians and the saudi arabia talking about cooperating to stabilize the oil mark but stopping short of agreeing to a freeze. Global equities strategist at j. P. Morgan. Great to have you on the program. On how your thoughts significant the comments work around corporation on Oil Production from the russians and the saudis. Others have been quick to pour cold water on those comments and the oil price has retreated but does this herald something new for the market . I think there is not that much substance behind these comments. The big picture is the following. The dollar is not making new highs. The supply has been curtailed. The emerging markets are picking up. The oil price should be supported here. That means the equity market looks relatively appetizing in terms of the oil producers. Is this a Tipping Point . Yes, we think the Energy Sector will be doing well. The emerging market will be doing well. For the overall equity markets, there is an issue here. There is a tradeoff. People are discussing it the fed will be hiking in q4. This is a tradeoff that we had last year in december when the fed started to hike. For the overall equity market, there is a complacency building here. Anna you say complacency is building in global equities. Is that because you think the fed will hike and the market could be wrongfooted . My thinking is that will stay low. The fed will not do that much because growth will be weaker. This is a problem. Have negative tradeoff either this happens or if the fed does hike, you have a pressure on the valuations. People in the market think gulf will be fine and we can tolerate the hikes without problem. Think we will get stuck on one of these two extremes. Caroline how does the dollar play into this and how does that affect the oil market and commodities . There are two distinct scenarios. One is the fed will be hiking and bond yields will be going up. I think this is the most important for Equity Investors right now. Investors have to decide if they will extrapolate and chased the bank expectation. At the same time, it means the emerging markets do not do that well. It is basically a 2013 type of story. The other scenario is that growth is not so great and the dollar does not grow that much. And then oil prices are supported. The workking at function, the probability of a 32 . In september is after december, 59 . How do you think equity markets would respond if we saw the fed hiking in one of those months . How would you protect yourself from the possibility of a hike . Hikes wereally, bullish for the equity markets. Be a proclamation that growth is Strong Enough to allow the hike. And confirmation for the equity markets. We are not in the normal world. We are in a world where the equity markets have not supported for a long time. If you do think Interest Rates go up from here, the way to hedge yourself and protect yourself is within the equity markets you play a rotation, by financials and purchase cyclicals. What i and saying is that we have a very strong rally in the banks since early july. There was a dig rally in july and august but the bond yields have not gone anywhere. There is a disconnect. 30d yields need to go up basis points from here to justify where the cyclicals are already trading. Driving this. If you take a big step back, at the end of the day, we still have ecb which is buying almost 300 of the net inflation in europe. We still have the Consumer Spending is fine but if you look at the manufacturing, it is not that great. Caroline looks like you are more risk hungry. Thank you stared thank you very much. Thosek note for traveling. London city airport says it is experiencing a disruption on the back of a protest. Some experiencing disruption. So if you are going to the city airport today, do be warned that you want to get there a little earlier. Looking ahead to saudi arabia. Indexci emerging market in 2018 is looking to welcome saudi arabia. Market arethe stock part of the saudis plans to wean itself off of oil. In your exclusive interview with the chairman of Capital Markets of authority, what did he tell you about the ongoing reform . He said there is plenty more where that came from. Time theye second have moved in less than two years on those restrictions for Foreign Investors. They want to bring in as much foreign capital as they can. , as much as the Lower Oil Prices has not created the strategy for reform, it has accelerated it. We are comingere from in terms of foreign investment. We are looking at the percentage of Foreign Investors owned of total shares. The red line is the 1 line. It has been harboring there for the last year. They have not been able to get a lot of traction from that. What they have done is reduced the threshold from 5 billion to 1 billion to make it more accessible to funds. A have also changed the settlement they have also changed the settlement cycle. They are also looking at reducing their debt Capital Markets. A comprehensive list of changes when they are trying to diversify away from the petrodollar dependence that has dominated the saudi economy for a long time. Anna i will ask you more about saudi arabia to be included in the msci emerging market index. How important is that to the saudis and what are they doing . Priority. Is a top the chairman made it clear to me that they understand that they to see aeally going lot of interest beyond the current levels unless they get included by the msci. They are speaking with investors. They are going to look they are going on a roadshow to new york and london to showcase those opportunities. Here is what he had to add on the msci. Yes, we have been in discussions with msci and other international indices. Continuous engagement with the msci. We believe that the amendments that have taken place, the implementation of these will , in 2017,ly next year should be enough to put the 2017. Market within it takes four quarters of that for the inclusion. Added that they were working on those reforms to prepare the Saudi Exchange for a saudi aramcoing of expected to be the worlds most valuable company. At the moment, it does not have the depth to absorb the size that ipo would be like. Plenty to look forward to. How much of that will materialize over the next year given where oil is and where the fundamentals of the kingdom are. Anna absolutely fascinating interview. Markets middle east anchor. A bond buying shuffle. Will the ecb need to adjust its quantitative easing schedule. We discussed the options on this next. We discussed the options we discuss the options on the table, next. This is bloomberg. Welcome back everyone. A live shot of a gloomy london. 133. 24 if the u. S. Found bess is the u. S. Dollar against the pound. We talk about the for a change in the rules of the games. Ecb will extend its quantitative easing program. Policy makers may have to reconsider what they can actually buy. Some options include changing an issue and the limit, the deposit rate, or expand into new asset classes. To help us digest all of this is global strategist from jp morgan. Are we expecting an extension of quantitative easing . We as a house are not expecting them to move at all on thursday. But we do have a few that before the end of the year they will make an extension over here. This is important. An increase in chatter in the market that we might be at a turning point where with bond yields and ecb could be important here. If draghi sounds relaxed on people will think nothing will change on thursday but we do expect an extension of the Bond Purchase Program at the end of the year. Anna how will they do that given the limitations they are under at the moment . I am not an expert on the ecb. We think there are a lot of options available. They could increase the limits. It does not impact their criteria. For theeven move there are a lot of different options. The key is the tone. Is the central bank committed to being very dovish. The decision on the rotation. John norman was werting to look ahead when do see the ecb step back from limited quantitative easing and when we see italian and spanish bonds underperform. What about the equity side of the equation . We are underweight in the equities. They are underperforming quite badly. Italy is down 20 on the year. Thatlleague was suggesting we will say dovish but there is a risk. What if there is an up move in the bond yield . The internal leadership in the equity market. As the bond yields have been going lower end the yield curve has been flattening. The cyclicals were left behind. In the last two months there has been a huge rotation. An aggressive bounce. And now you need confirmation for this to continue. Thank you for your time this morning. We are out of time here on countdown. Is next. Ove this is bloomberg. Cap up welcome to on the move. 7 30 a. M. In london. We are counting you down to the european open. I am guy johnson and i am back alongside Caroline Hyde in berlin. Here is what we are watching. Extra sweet. Money in itsmore takeover bid for monsanto. Will 60 million be unethical seal the deal. Asian stocks hit a oneyear high. The