Transcripts For BLOOMBERG On The Move 20141201

Offer. The equity markets are a little bit lower. U. K. Manufacturing data will come out later on. What is taking the ftse down . Levels of 2009. Ubs was justo onset, saying, perhaps it is all a little bit overdone in terms of the Price Movement of oil. Have got Goldman Sachs onset with you shortly. Commodity super site over . If he ever does want to do a deal for real. The whole mining complex all lower. Commodities are lower. China manufacturing misses. Oil prices are dropping. We will pick up the interview of mr. Gilbert, the ceo. Equity markets are lower. Manufacturing will come out in the united kingdom. Think typically the final numbers are revised. According to bloomberg elevation it has been revised. Lets have a look. Price one of those moments where you wait to see the price. We will come back to that. There are a couple of stocks that are worth keeping an ion. T is the Telecom Group worth keeping an eye on. It is the Telecom Group, vodafone. Will they do a deal . The debt levels if you got together with liberty media. . Ave you got the content these boys have got the content. Didnt run their mobile business culturally well. Thats why they sold it in the early 90s. Thats the big concern. Thats why they sold it in the early noughties. Culturally, bt, do they know what type of expenditure it is network . Take to run a vodafone worried about debt. Bt worried about the culture. Beast the loser if this goes into a monster mobile, telephone be hemet . What would that do be him if behemoth . What would that do to sky . Gold is down. Not a pretty start to the week. Thank you very much. Still waiting for a price to come out for bt. I am looking at the ftse down by 50 points. One piece of data we are watching. Lets kick it off with those disappointing manufacturing numbers out of china, falling to the lowest level in eight months. We are joined by tom warlick. Belowi number comes estimates. Is behind the move lower . I think the problem for chinas economy remains this downturn in the real estate sector. Real estate is really the main contributor to chinas growth when it is going well. When it is going badly like now, it weighs on the rest of the economy. It weighs on everything from production of steel to cement, to home appliances, even demand for autos. Right now we are in a weighing onthat is everything else. That is why we are seeing disappointing numbers and signs of weakness heading into the final weeks of the year. When we see these numbers and we see the data numbers disappoint, the first thing we ask is what does it mean for policy makers . We have seen the Central Bank Cut rates. Can we see more work from the central bank of china . I think expectations are focused on cuts in the reserve requirement ratio. I think lots of analyst see this as a complement to remove. You cut Interest Rates to lower the cost of credit. You cut the reserve requirement to make Funds Available to lend. The pmi data is a reminder growth remains weak. If you look at the money market, the cost to chinas banks is still high. They are still having to pay a premium to get the funds they need to lend. That suggests we might be heading towards a reserve requirement cut for chinas central bank. Great work. Lets stick to china here in london. We are joined by the ceo of Goldman Sachs Asset Management international. Andrew, great to have you with us. Is there a battle between old china and credit fueled growth . And the new china and this restructuring . A kid it was called a blinking contest. It old china just blink . Blink . Id old china just i dont think they blinked. We are used to it growing at a high rate. It is more likely to grow somewhere in the region of six or six in half over the next couple years. These reforms they are putting in place, dealing with the real estate sector, they are good for the longterm, but in the shortterm term, we have to get to a more Sustainable Growth half. I think thats what we have to grapple with. You look at a chinese bank that felt the need to cut rates. He used to talk about decoupling. Forets seem to be cutting market reality. There are points where they needed to cut rates. Which one is right . The weakness . Is that what we should be concerned about or the market rally . Is that justified . I think if you believe china moves into more Sustainable Growth rate, it is justified. We have those lower Interest Rates. There is a chance they do more. Think you could be a little more optimistic about the Sustainable Growth rate even though the growth rate is lower than we have seen in the past. We are going to talk commodities after the break. Here is a look at one stock on the move this morning. Balfour bp opens higher. I will bring you the price right now. Balfour bp up over 6 after john bid for thea Publicprivate Partnership portfolio. A bit of one billion sterling, just under balfours own valuation for that side of the business. The stock of 6 . Lets check on oil. Crude continues to get crushed. Heading for the worst year since 2008. We will continue the conversation on commodities after the break. Here is a look at the general market. The ftse opens lower. Lower. Ts eurozone equity markets lower as well. We will be back in two. Welcome back. This is on the move. It is time to talk about oil. The price of oil dropped 20 . Ince start of november the losses accelerated. As if the move were not enough, here we are with brent trading at 70 a barrel. Is andrew. I was off last week. World, where Real Oil Prices were a good thing. Where are we . Good thing, bad thing . Fort is a good thing growth. Undoubtedly we will see better growth as a result of the lower oil prices. In areas like the eurozone, where the ecb is focused on the inflation rate, there is a chance it pushes that inflation rate lower. I am not sure if there is such a thing as good inflation. It is differentiating between what happens in the u. S. And putting modest pressure on wages. You might see headline inflation drop because of oil prices, but if you look at the core, we think it is going to be stable, maybe moving up. But lets be clear. This fall in oil prices could be inflationary if you think of the impact it could have on certain aspects of the economy. There are going to be certain sectors. There is a question how much will take place in the shale sector. I think people are thinking, if oil is down at 65 or 60 or even some, those that choke off of the investment . We think it is going to be of further down track. The rest of the economy is doing just fine. Consumers ato give real boost. We should see a strong finish for the year. Bond yields, record lows from germany, spain, italy. I dont even know where to start. Recordere across europe, bond yields. The pricing of qe, betting against it actually working. If i believed drug could stoke inflation, do i want to hold france at 1 over 10 years . I dont think it is about stoking inflation. Ecb is doing quantitative easing, i think some of that is priced in. While it has weakened the dollar, the euro is likely unchanged. I am not sure if it is an inflationary fear in europe, but the notion of qe and getting activity moving i think is priced in. Do you think the move lower we have seen over the last year is starting to go too far in your mind . Do we see a reversal this year, or is this the trend set in place for the next 12 months question mark i think we would differentiate between what is happening in europe and japan versus the u. S. Placeis this trend set in for the next 12 months . We talk about the fed hiking rates. There is still speculation over quantitative easing. For us there is a real the virgins between europe real divergence between europe and the u. S. Weoctober 16, the day after spoke on october 15, you stayed bullish. The stock is higher. When i look at the equity market, i would say, the economy must a very strong. Markets. The commodity i look at the bond markets. I look at the strengthening dollar, the weaker oil prices. Which asset price is right . I think you have winners and losers out of this. The weaker euro is good for european economies. For europeane stocks. If we are in a world where and interestng ok rates are not moving up sharply positive risks a environment for us. The equity market going into 2015. Long. Ear they were going is that the trend for next year . It depends what happens to the oil price from here. It is positive for the consumer. I think you have to word to wonder about the Energy Companies in the u. S. , in particular shale. Fieldsre a number of close to those levels. I think we would be weary about the sector, but it is positive for the consumer. Lets talk about the fallout and the dead some companies have issued. Debt, theissued the Company Looks great. Oil at 65, do you start to get concerned . We are concerned over the possibility of default. It will depend how low we go or how long we stay at this kind of levels, but i think if we stay in this zone there is a possibility we will see an uptick in default in that sector. It makes up about 15 of the high yield impact. We have seen that contribute to the widening this year. It is important to differentiate between the Energy Sector and the highyield market. The selloff never discriminates. Thats a problem. You have an asset class, its bills into the rest of the asset class. Are you can it spills into the rest of the asset class. Are you concerned . Valuations are quite rich. Always a risk of a spillover. That is why being an active manager is a good place to be. You can take advantage of the market not taking advantage of the places that deserve to be wider versus those that get caught up in the broad selloff. We are concerned that sector may come under pressure. It is an opportunity if we see it probably wider across the spectrum. Ceo of goldmann, sachs Asset Management. Coming up, we are seeing a wave of m a that could change the sector. The telecom for now equity markets are lower. Spanish pmi comes in at 54. 7. We are expecting 52. 6. A move higher on spanish pmi. Footie down by almost 58 points. We will talk about that after downreak area ftse by almost 58 points. We will talk about that after the break. Welcome back. Back to one of our top stories as we learn bt is looking at buying assets of ee and 02. The deal would seem to be already upon us. Here is caroline hyde. A look at vodafone and the prospects of a deal. How do these things fit in . Bp is worried about particularly in the united kingdom. This is a push for quad play. What is quad play . It is were you not only have tv and broadband, but mobile. Vodafone has mobile. It wants to add tv. That is were Liberty Global could come in. That is where Liberty Global could come in. Suddenly these adversaries could become friends. They could team up. We could see a merger creating a 130 billion company because they feel they need the wealth of offerings to stop people may , sooving to bt in the u. K. You have virgin media and vodafone. In thecomes a good mix u. K. , but you are a european juggernaut. We know Liberty Global has a lot of debt on its plate. This would be a monster of a company. I look at this company and portuguese assets. I cant keep up. This is a global play. Ember, communicate communications is the second hottest in terms of deal offerings. Basicallyllionaire, wheeler dealer back in the 90s, he has up his offer for upped his offer for portuguese assets. Get his hands on portuguese assets. What is in it for them . They are big in brazil. They want to pay down some of their debt and create more consolidation in brazil as well. This could be a global for a in terms of deal making we are about to see. All eyes a global for ray foray in terms of dealmaking we are about to see. Are we going to go back to 2001 . We saw share prices tumble because it splashed too much cash. 300one spent more than billion in the early 2000 because they were buying up companies. They also spent big on three g. The phone. Use many might be worrying vodafone is splashing too much. And vodafones mind it has to offer all of those things without stopping people from jumping to a competitor. They need to start offering some of the cash. All about the quad play. Lets keep it on the market is e. On is saying goodbye to fossil off itsd will spin conventional Power Generation unit. Hans nichols joins us for more on berlin. If they sell these assets, what is left for this company . They will have renewables and their transmission grid. Thats what they are doing. They are saying, we are no longer going to be splitting the atom for energy. We are going to be splitting the company into. These require two different strategies. Haveenewable company will 40,000 employees. The new one will have 20,000 employees. They will be listed separately. This is Angela Merkels plan to trim down the amount of energy germans used from nonrenewables. Right now they will go up. Renewables to be 80 by 2015. By 2050. Here is what the ceo said. We firmly believe i creating to independent companies with by independent companies, each with a distinct profile it is a lot more difficult for Utility Companies to make a profit because wholesale prices are so low. Very much. U thats almost it for this first half of on the move. We talk winners and losers. In the aftermath of the opec deal, who will benefit from a lower oil price. I am looking at rent trading brent trading at 68 a barrel. The ftse is lower i57 points. The dax pretty much flat on the day. 57the ftse is lower by point. Join us for more in two. Welcome back. Im Jonathan Ferro at Bloomberg European headquarters in london. This is how things are shaping up right now. Ftse 100 is down by 0. 9 . The dax down by 13 points. The stoxx 600 down by 0. 5 . Guess which industry is weighing on the markets, oil and gas, the Energy Companies. Brent getting crushed once again. Specific nowck with caroline hyde. Looking at oil but also the m a this morning. We are actually seeing a few stocks on the rise. Top of the leaderboard, Balfour Beatty. Not often that you see Balfour Beatty winning, but it is only up because we are selling some assets. It could be one billion pounds itsash, uploading Publicprivate Partnerships. Tocould be selling that over john lang infrastructure fund. 5 . While, altus up again, it is m a driving it higher. This time it is the buyer. Why the shares going up . People like the idea that it is eyeing up other assets in portugal. They did by sfrs unit earlier. Time, smaller amount, 7 ,illion euros, just in excess putting it ahead of a rival bid from bain. We could clts expanding in europe and investors seem to like it. Majorsdownside, the oil are all falling. The worst performer is tullow oil. We are seeing prices down once again. Worries that opec not doing anything in terms of production, we are going to keep on seeing that a lot. On the demand side of things, you have worries that the u. S. Arent splashing the cash so much. Tullow on the decline. Here are top headlines. The you ks exchequer has given his priorities. , george on the bbc osborne said there should be further payments on welfare to spend more elsewhere on infrastructure projects. We need to do more. We need to improve our productivity. We need to export more. Our main export markets in europe are week. We need to look at china, india and brazil. We need to make sure that our kids have the right skills. We are going to see all of these things undressed on wednesday as part of a plan to prepare this country for the global race and the challenges we will face in the modern economy. Switzerland voted against initiatives proposed in a ballot over the weekend. Taxswiss voted not to curb breaks for wealthy foreigners and did not impose a strict immigration policy. The nation also voted on a measure that would deal with gold. The commodity sank on the news. The Chinese Government manufacturing gauge dropped in november to 50. 3, lower than the analyst estimate. The fall comes after the government ordered a factory shutdown outside of beijing. It is surrounding promises to curb pollution. Now, chinas manufacturing may be slowing but it is getting a boost elsewhere. Joining me now to talk emerging markets is the managing director of macro strategy at trusted sources. Right to have you with me. I want to start with china. Everybody struggles to understand what is going on. It matters because it is the worlds secondlargest economy. What does it mean . What is happening, a slowdown or something more . All the points you make are correct. There are some doubts about the data. The Bigger Picture here, and our economist has been pointing this out, the economy is being rebalanced and reformed. That means it is going to slow down. It is moving away from an excessive and vestment trajectory. That involves a Slower Growth rate. Are they going to stomach that . It felt like all of china blinked. Cut rates for the first time in two years. Are they going to start restructuring . I think so. Tooissue is they cant have much of this good thing and have too rapid a slowdown. That is why we are getting a stop go many cycle. Once they tap on the accelerator, once and a while they tap on the break. That is the cycle we are in. It is going to continue for a while. They are managing the growth rate gradually. Going into 2015, do they change the way they use the gdp target . Would they be better off getting rid of it . Banish the rod, get get of the gdp target . In an ideal world, that is where they should get to. The Bigger Picture here is that you have the second largest economy in the world. It is not all the way there. It is inevitable that it grows more slowly. Thesentry can generate kind of doubledigit growth rates forever. What we have to get used to is a china that is going to slow down , that has some risk of a financial crisis, but is managing those risks reasonably well. What is interesting about this is the collapse in commodity prices. In oil, another story completely. How much of that collapse in oil whathaped your vision for is going to happen next year . I think it is important to identify whether this is a demand shock or a supply shock. There is arguments on both sides. The point that you make, that this is going on in Industrial Metals and other commodities, says that it is a variety of different things. It is a slowdown in global growth. It is a stronger dollar environment. Context, in sum, oddities, there has been a supply response to the big boom in the price previously. We are getting all of these things and that is why it is being hit so hard. We could talk about losers. Lets talk about winners. I remember when we talked about india and the import bill for the oil refiners and how it was hurting the rupee. How much of this is a nice cushion for the Indian Economy . A huge difference. I have been a longtime skeptic on my native country. I am becoming more optimistic. There is a reformer in charge. , credible sensible and authoritative figure in charge of the reserve bank. The economy is actually struggling to grow. It is going to get a big benefit from the falling price of commodities. Past balance of payments crises in india, the big reform, one that was driven by the gulf war when the price of oil shot through the ceiling this time what we are facing is a much lower oil price. A somewhat complicated International Capital market environment. This time last year, nobody wanted to touch india. It is probably the leading fragile five economy. Now it has flipped around. I think that is going to continue for a lie a lets talk about losers. There are plenty of losers. Lets throw the Conspiracy Theory to one side and look at the facts. The oil price has taken a beating. It is another straw on the camels back. Sadly i dont think it is going to lead to a very rapid change in ukraine. There are some important positive developments taking place, but the Bigger Picture is , sanctions are in place at least until july. Possibly longer depending on what happens with ukraine. On top of that, we have this additional downdraft which is probably going to tip the struggling economy possibly into a recession. Talk about a breakeven price. You see brent at 68. Lets talk about the collapse in the ruble. How much is that going to hurt . It is hurting them on the inflation front. On the fiscal front, it is kind of a benefit. The price of oil falls, if the price of the ruble depreciates more, there is a fiscal gain in the accounting sense. That helps make the deficit smaller. When we talk about that breakeven price, shouldnt we be talking about it in rubles . Yes and no. Really it is a dollar priced commodity despite the efforts of russia and iran and other countries. In the end, a lot of that benefit is going to be eroded over the course of in time by inflation. There. Benefit is it is transitory. What needs to happen in russia and many other countries is, now that the price of oil is falling in possibly a secular way, what we should see is an adjustment in the budget. Managing director of microstrategy at trusted source, we have to leave it there. Japans Credit Rating cut from aa three at moodys. The outlook is stable but the cut in the Credit Rating, they cite, guess what, the third arrow of abenomics. It is easy to have stimulus. A lot harder, as we know, to really drive through structural reforms. Moodys acting on that, cutting the Credit Rating of japan. The outlook is stable. We will bring you more details on that throughout the show. The back remains unchanged. More on that news later in the show. Coming up, mega m a monday. Vodafone is considering a tie up with Liberty Global. It would create a 130 billion giant. We talk telecoms after the break. Welcome back. Here are some companies on the move this morning. Sony may have had several films stolen in a hack attack last week. According to a person with knowledge of the matter, movies including fury, annie, and still alice have all appeared on file sharing websites. Sony says it is working with Law Enforcement to investigate the breach. More strikes at the telefonica. Pilot will out on the job at deutsche lufthansa. Pilot will walk out on the job. Unitirlines german wings will not be affected. Glaxosmithkline is set for the planning for reorganization that would include hundreds of job cuts in the u. S. And london. They are still struggling to sell machines in the u. S. , which is the biggest market. This comes after the drugmaker pledged to cut costs by one Million Pounds over the next three years. Have sufferedto more than 100 billion in redemption from its top funds. The Financial Times reports that pimco has accounted for half of the funds after being hit with the biggest outflows this year. The companys poor performance predates bill gross departure. To one of our top stories, vodafone is considering a link with Liberty Global to create a phone, internet and tv Company Worth more than 130 billion. This according to people with knowledge of the matter. Joining us with more is matt campbell. Of work toent, a lot come, how close . While this is very real and something vodafone is exploring, it is important not to get too excited about something coming tomorrow. Enormous undertaking. There are huge amounts of work to be done. There are no talks underway currently with liberty. Certainly no formal discussions. I think this is in the air. It is coming down the pipe, potentially, but not going to happen in the next week or two. What is going on with bt in the u. K. Talking about buying a mobile carrier, that lights of see thisr vodafone to new competitor getting bigger. When we talk about consolidation, the convergence between fixed and mobile, is it about nothing else . The u. K. Is catching up. Play has lagged. In france, it has been standard for years. That was pioneered by iliad. The u. K. Is catching up. When countries catch up, they tend to catch up very fast. A totallyit went from nonconverged market to a very converged market. Of evolution we seem to be seeing in the u. K. I usually think about regulators. When you hear that bt wants to make a significant takeover and are looking for partnerships, is there going to be some obstacles . I think the bt deal should be relatively smooth sailing. Bt doesnt really have a mobile offering right now. In terms of buying a mobile carrier, we are not talking about competition concerns. What would be more complex is if someone tried to merge two mobile carriers together. When you take the u. K. From four players down to three, that would be a big challenge for regulators. Lacks excited about a deal. What else is out there . Telecom is hot right now. We had one in the spring around sfr and altice. We havent talked about altice and portugal telecom. Telecom is constantly going on. Numbers, big companies. Beyond that, i think we are going to see more of this National Level consolidation. Been talked about as a place where that might happen. You could see it else is where elsewhere as well. Newstt campbell, bloomberg deals reporter, just some breaking news. We have spanish pmi. That was a beat. Continuing to impress the Manufacturing Sector in spain. Italy, a disappointment. Pmi unchanged at 49. That is contraction. Forecast was 49. 4. Italy really struggling. Manufacturing continues to disappoint. Up next, we talk another area that struggles. A new term for the greek Prime Minister. He is considering accepting a full role for the imfs next a deal. We will talk on the situation after the break. Welcome back. Time to talk about greece. To country may stay attached imf economic support, dealing a blow to the Prime Minister who is pushing for greece to have a clean exit from this bailout. Hans Nichols Nichols joins us from berlin. What would happen next if greece does indeed decide they need more time . Greasewood need to present formal plans. Toy need to make the request the eu, to the imf. They need to ask for a line of credit. We are talking about potentially 11 billion euros. The dutch finance minister who was here in berlin, here is what he had to say. He almost seemed more concerned that it wouldnt happen. The market apparently doesnt like that. He said. Hat i am saying every day the program is running out, there is a tight timeframe that is the dutch finance minister. Here is the challenge. To getpledged, promised, rid of this, to be free of this imf eu bailout. It is set to expire at the end of the year. He has elections in february. He is going to face a difficult challenge. If he is going to ask for a time line of credit, that is going to be politically difficult for him. You have seen the 10 year surge. Theany basis points over last couple days. Over the weekend, we didnt see much movement. We will see how quickly it reacts. Thank you very much, hans nichols. Some concerns in greece, japan as well. We are joined now by francine lacqua. Japan japan, we have that news from moodys. They downgraded japan. This has also its of implications for the japanese yields. It has a lot of implications also from the Prime Minister. We are looking at elections. What does it mean . If you go to the votes, and you see that you have just been downgraded, you think twice maybe about reelecting. That means abenomics once again put in question. Whatll also go through Vladimir Putin is expected to do in turkey. And i have a little technology. It is cyber monday. Youk to a guy from know what they do . You say, Jonathan Ferro, one of the smartly dressed people in knowewsroom, i want to where you buy your things from. So i have a picture on my iphone and it tells me where you shop. This is the future of retail. We speak to the man who came up with the technology. Im kind of concerned about that. Japan september 14. That is the election date. Questioning abenomics. Effectively questioning the politics behind abenomics and his ability to strive through those reforms. Way, you look at it this im still trying to get to the bottom of it, it is whether the moodys downgrade will have an impact on the elections or just on the way people think. Times, thesee agencies are backward looking. A lot of people will brush it off and say, they are always two steps behind. Does it really make a difference to japanese policy . We are right in the middle of this. We dont really know. They pushed back the tax hike but we dont know the effect of this big financial experiment. Whether that has an impact on future policies, i would argue possibly. Francine lacqua of the pulse. That comes up in five minutes. German manufacturing pmi revised lower to 49. 5. That is the final reading for november. That is contraction territory. The socalled engine of the euro zone economy. It was right on the line between contraction and expansion. 49. 5. Forget about that spanish beat, it is all about germany. Eurodollar on the data. See where we are trading right now. The euro trading right now at 1. 2451. Very marginal drop off. I will show you where the drop has not been marginal, oil. Oil getting crushed once again. Ill bring you the price of brent right now. South of 70. Brent, 68. 71 that is the big picture of the markets right now. Oil lower. Check out the moves in the general equity markets. Stocks down here in london. The ftse 100 down by almost a full 1 . Good luck for the rest of your day. A downgrade for japan. Moodys cuts japans rating over controls concerns over its policies. Telecoms takeover. Bloomberg discovers that vodafone may bid for Liberty Global to create europes Largest Telecom company. Can oil take the pressure . Oil tumbles to the lowest level since 2009 after opec maintains outputs. The Oil Companies survive slum . And, rubel route. Can russia weather the storm