Transcripts For BLOOMBERG On The Move 20150204

Markets have had a bullish run. The Energy Producers rose by almost six and a half percent. What youre seeing is is that a sustainable rise. Is that bounce and oil good for the market . They say, no, its not because it would encourage lazy producers. Sky leads the pace. A great interview with the cfo. It is the italian french british juggernaut. Caroline hyde will have the details. Record sales in germany and austria. The number of people going off in search of new opportunities. Greek bonds, great markets rising by 16 . Sky stock up 2. 8 . 959. 5. Standard charter up half a percent. One of the biggest shareholders Aberdeen Asset management a very good bank. Mr. Sanz has pledged 4000 job cuts, and he is making 400 million in savings. The stock is marching higher in london. Sky up 2. 3 . Not you individually, but on a global basis. They are confirming 2015 has been a good year for their core brand. Fashion and leather is where it counts. Up 4 , top of the analyst estimates. They were thinking no growth in that area. Cognac we see a resurgence in sales. Selective retailing and cosmetics. 5. 5 , who says luxury has got problems . Luxury and focus at the market open. Oil a big bounce this week crossing the 20 threshold to put it in a bull market. Oil in a bull market. Ryan chilcote joins us for more. Oil prices much higher over the last couple days. It seems to have stalled this morning. It reached as high as 60 a barrel, just shy of that. Crude inventories is what you have got to look at. We are going to get the number from the department of energy later today. 10 30 eastern time. One of the reasons possibly is yesterday we got to estimates, a survey of estimates from economists that believe the surplus, that those supplies continue to rise. But thats with the number is going to show us. The expectation is they will have risen by three and a quarter Million Barrels last week. The surplus keeps getting bigger and bigger. Perhaps that is what gave people pause in the buying frenzy. Crude production another interesting one. The backdrop continues to rise. No real reason why we should see a High Oil Price given that. A technical point for you, its called the 50 Day Moving Average. If you look at it, the 50 day average for the price of brent is 58. Where are we . We are just shy of 58. When you get to the 50 Day Moving Average where the prices right now, you tend to get technical traders selling. Lets try to cut through some of this noise about a bull market. Is it anything but a fourday bounce after a collapse over the last six months, or dare i say this is the beginning of a trend . Not too many people actually think were going to see a sustained bull market. One of the things we had on friday is an indication the rig count in the United States is falling, so the number of rigs in the United States that are getting idled because its not economic for them to produce oil in places like north dakota is on the rise. You see that. That was a leading indicator of what is going to happen in terms of reduction. That is one reason the price of oil should go up. That would get taken off the market. Leon that there wasnt a lot of news that suggested oil should be getting more expensive. Most of the analysts we talked to said it was two things. It is opportunity buyers. You only have to go back to the middle of january to see more than 5 rise in the price of oil. They are out there. Lets not forget brent is less than half of what it was a year ago. That is attractive for those people willing to take that type of risk. Lets get the investors take to see if this is attractive. We are joined by the cochief executive officer with approximately 60 billion in assets under management. Greater have you with us. A look at the oil market. A fourday bounce from a sixmonth collapse. Could this be a trend change in the trend . You look at what happened. We sell will go down. We saw oil go down. You see supply go out of the system. Buyers will come. That is what is going to lead to some sort of rebound. Then the market gets access. What happens with production . The big producers will come on and say you wont have the investment in. We will have cut back on production. Do you subscribe to that theory . That works, but you presume there is no technology. Look at what is happening. Look at how they are cutting pollution. For an economy like the u. S. , oil has not grown in years. Look at china. I think the Energy Intensity is reducing. Lets talk about emerging markets. We get to this discussion about whether the u. S. Will blink first or whether opec will blink first. Perhaps disregard that you are looking at private producers. Add in the fact these guys have different pain thresholds. What are the losers . 2000 was the era we talk about emerging markets. That was when china was urbanizing. Now you have got to look at these countries on their own merit. They need a strong leadership to get them out of these situations. Good news for india. Not so for countries like nigeria and russia. When i price brent, the picture looks a little better. Is that not a solution but some kind of support to push down the currency . There are a lot of factors. What happens to the banks . When you devalue a currency significantly, it is a tough call. Very quickly before we go to break. The big loser, which is the country you are worried about right now . You kind of couple it with what is happening in terms of government response and the investment in the economy. The policies have become very goodlooking. It is a large economy. It is not a small economy. You are going to stay with us. We are going to bring you a little closer to home. Grease meets germany. A softer tone has soothed investors, but has anything really changed . We will have more when on the move returns. Greece still very much in focus. The Prime Minister has been on his European Tour. Investors have been hanging on his every word. Prime minister tsipras got a little gift from Prime Minister renzi. A tie. Will mario draghi be leaving within a gift . Lets ask hans nichols, who joins us from germany. Which of these meetings is more important for the greek finance minister . What he wants from draghi is a little more time. In that sense, the drug a meeting is more important. The draghi meeting is more important. They are clearly going to exit this program. It ends at the end of february, and they are going to have a shortage. They want some sort of bridge financing in place. The question is how will they get the bridge financing. Are they going to need a dispensation to issue more treasury bills . It is reported they want to go up to 25 billion euros. There is some indication that mario draghi is balking on that. Lets switch to the political side of things away from the monetary side of things. An important story about merkel and the German Government wanting to play hardball, wanted to play a little bit longer. They expect this to come down to april and may, when greece will face a more acute cash shortage. Publicly they are saying they dont seem to be that impressed, and they are waiting to see a firm plan. Degree government is working on its position, which is very understandable. We shall wait for proposals and enter into talks with them. There will be sufficient opportunities for this. I dont want to comment on every single detail. You were talking on how greek markets seem to like the proposal for a flock us like the proposal. In germany it hasnt gone down that well. One of the key lieutenant said he was not going to respond to what he called a halfbaked plan. That gives you an indication of what he will be up against when he arrives in berlin on thursday. The reports come from everywhere. The greek finance minister seemed to suggest greece will take some of the 7 billion from the bailout. What is that about . The number they are asking for is significant. It is 1. 9 billion euros. That corresponds with what greece previously said is the interest the ecb are earned from their invest in and in greek bonds. He is saying the money is ours. It is unclear whether the eu subscribes to that view, but it looks like they want to take 1. 9 from the bailout fund. That would mean they exit the program at the end of the month and they will be on their own, and they are at the mercy of the ecb on whether or not this liquidity windows are going to be open. In terms of calling the money theirs that seems to be a little provocative. We will see how drug he reacts to that later today. Fascinating stuff. Lets bring in role raul. You study emerging markets. It doesnt feel like a developed market situation, does it . Clearly not. What we look at is the euro releases a lot of pressure. What you want from greece is a complete plan moving towards fiscal surplus. Hopefully that will give them the leeway in terms of repayment. That is the way out. On the other side, part of the fiscal deficit has to be a credible one. You cannot every two years and ask cannot come every two years and ask for more time. You talk about tail risk. From the outset looking at europe, where it is the risk come from . Is it the Banking System . The risk comes from deflation. We believe youre in a goldilocks scenario were Commodity Prices lead to consumer demand. You have euro depreciation. We have seen decent job creation in spain. You have those little bright spots here and there. Things are falling in place. You need consumers to respond. You dont need them to go back in there shall. Their shell. Thank you for joining us. Next we will talk about corporate earnings. The Company First half sales gained strength in the u. K. And ireland. Details next. The stock up 2 . Welcome back. Sony narrowed its loss forecast by 26 this morning. Our bloomberg reporter joins us from hong kong. Thanks for joining us. Any word on the hacking thing as well . The hacking story was huge. Analysts were not expecting a big loss coming off from that. That will cost around 15 million, which compared to the size of the company is not too big. Lets look at the earnings. Sonys net loss narrowing to ¥170 billion. Thats a big improvement from the previous target of 230 billion yen. Sony is getting a boost from Strong Demand for image sensors. They have a good share of the image sensor market. They are boosting the capacity by 33 by 2016. Thats a big plus. The playstation for console selling pretty well over the Christmas Holiday season. A solid demand for those, this time excluding the restructuring profits they are seeing 79 million. They expect an operating profit of 170 million. But as the earnings wrap from asia right now. Lets bring it to the u. K. Sky released results showing growth as the Company Becomes not only a dominant player in the u. K. But europe. Profit, sales, decent numbers. Hats off to these guys. This was the dominant force. They had about two thirds of the market. Rupert murdoch has turned this into a european colossus. It is the second biggest. The growth that was good. Sales up 5 . Profit up 16 . I think what really stuck out was losing their customers to the like ofbp. U. K. Highest growth in nine years. They are saying germany, austria, record growth. We spoke earlier. It has been an excellent start. We see record growth in germany. The u. K. We have seen the strongest rate of cuts in nine years. We posted Revenue Growth of 5 which we are very pleased with. Also, they are not just growing in terms of international presence. They are growing in terms of the products. If i have to spend about every time someone says quad play someone would make a fortune. It is bp that basically shot of firework. Suddenly it is not just broadband. They want mobile as well. Lets bring it to my world a little more. Sport, it doesnt matter if you hold bt stocks or skies stocks. This is a huge risk. That is why we are not seeing the shares quite so euphoric. They are the highest in almost five years, but the risk is starting this week sky has got to keep the majority or they start to lose customers. Bank of america and Merrill Lynch said the company is underestimating the risk. They could lose 16 of their highest paying customers. There are more games to bid for. They are going to have to pay up. A big story for sports fans and shareholders. The price of oil we are going to talk about the impact on the u. K. Economy with Goldman Sachs kevin daly. Stay tuned. Welcome back to on the move. 30 minutes into a are day. Lets see how things are shaping up here in europe learned a solid day of gains. The dax is lower by 17 points some big gains i would say across most of europe. It is that time of the morning just opening,. An 11. 7 move for greek stocks. As we look at the situation some people are saying are we getting a step back from the greek greek government. No clear proposal. The finance minister mincing with mario draghi as we speak. Will the ecb turn up funding for greek banks . A story that will run for a couple months. It is down 0. 6 . Lets get inside these markets, with a glue bloomberg corporate story and the stocks to watch as well. Caroline i have a sprinkling of power and a bit of oil. The leaderboard is for, up almost 8 . Fortum oyj, up almost 8 . They say margins declined only somewhat in 2014. In russia, demand was flat. Overall they say growth is set for the future. Lvmh up 5 , near the top of the leaderboard for the stoxx 600 as well. Sales accelerated in that fourth quarter. Celebrating monograms, that is what helped sales. That also see fashion Leather Goods increase in throw in terms of sales and they are confident for 2015. Wine and spirits are down a little bit, they say cognac will pick up a little bit at the end of the year. But at this point though jewelry and watches front. Overall we saw the first annual decline since 2009. From reoccurring operations. It looks as though there are Better Things to come. Meanwhile, neste oil is the worst performer last time i checked. They saw a net loss of 23 Million Euros largely due to inventory. They say the oil price slump, a 50 slump in crude oil cost significant inventory losses. These are the sort of companies we are seeing hit by the current selloff in oil. They want to change their name. They will become neste, now. Jonathan even more confusing now. Nestte nestle there is the move there for you up 18 over the last week. The bp says it will be a long time before brent crude returns to 100 a barrel. The chief u. K. Economist kevin daly is here with us now. Three words, oil oil oil. We seem to have the debate whether it is good or bad for the economy. Kevin oil prices moves have two if asked, they reduce inflation, clearly. One of the issues the market is trying to digest is that impact is coming through straight away. You can see they are panicking. The impact on growth does not come through for another two to three quarters. Oil prices have fallen if you percent. Some even have fallen 50 . Some even lower than that. In or around three quarters to 1 boosts to growth. It is a big impact. It opens the possibility that Financial Markets and analysts could be surprised by growth. Jonathan what did they get wrong in your mind, from where you are sitting. There is a decent difference between the two, why are they pessimistic . Faces to you ks specific point. There is a broader kevin this is to u. K. s specific point. There is a broader issue. There has been break even inflation rates that have fallen dramatically in the last six months and yet, the implied growth rate in equities have not moved at all. They have seen the price impact but have not responded to the growth implications of it. I think the reason for that is they can see the price impact but have yet to see the growth impact. Jonathan dare i say it is there a problem off the back of this . If you chasing yields lower off the fallen oil price and all that is loading up future growth, are we seriously mispricing assets . Kevin i think there are a number of implications. In the bank of england we have a meeting this week and the Inflation Report next week. And we think they probably will lead against some of the rallying markets. I dont think it will be that dramatic because there are other risks out there and concerns over Financial Stability. With the eurozone and ecb easing so aggressively, they will be wary of sounding too hawkish. But i think they lean somewhat against the rally you have seen in fits income markets. We dont now price in the first rate hike until the end of 2016. I think Governor Carney will want to lean a little bit against that. Our own view is that a fall in oil prices, such as we have had, is at least broadly neutral for policy outlook. That is not how markets have responded. Jonathan we look at the chart and say eurozone inflation versus u. K. Inflation, if you look at that you can see saint maybe the bank of england needs qe as well. In this world a lot of people see low inflation and say it is a big problem, i call my mom its a oil is down to the percent, she cannot see the problem. You look at that chart of inflation falling, is that going to be a problem for the bank of england to see inflation that could come down to zero . Kevin when inflation was 5. 2 they were easing policies. They could easily look through it when oil prices were high. It is not quite the same now they are low, because there is still bear capacity in the economy. To a large extent, they will look through that. In a coming months we expect inflation to fall close to 0 . It will rebound toward the end of the year as the base effect from Oil Prices Drop out. To answer your question, are we seriously worried by deflation risk . We are not. The reason is two fold. Unemployment is now below 6 and wages are showing signs of rising. There is little domestic Inflationary Pressure as well. But the Cross Country comparison suggests it is difficult to predict inflation with a floating currency in any country. Japan is unique in this regard. We think it is particularly unlikely in the u. K. Jonathan i looked at the meeting on the horizon and a vote of 90. Should they have done . Kevin i wouldnt be voting for an Interest Rate rise now. I thought they jumped the gun in voting for a hike last august. If i was in their position, i would not have been voting that way. We have argued before they moved and after they moved, when they were about to raise Interest Rates, minority votes are not good predictor of monetary policy. The quid pro quo is when you dont have a minority vote it is still not good monetary policy. We dont think it is that significant when they have come off. If growth is stronger than consensus would expect, if wages continue to accelerate then, if the fed tightens policy toward the end of this year we are comfortable with the view that the bank of england will raise rates. Jonathan as we look ahead to the election and talk about the labor markets, potentially tightening and we get that wage market that has been elusive are you hoping for that to happen imminently or toward the end of the year . Kevin in terms of real disposable income there are two benefits. Oil prices falling and wages beginning to rise. The oil price benefit has come through in a strong way already. I think you seeing Consumer Confidence respond. Wage excel a ration is more of a gradual phenomenon wage acceleration is more of a gradual phenomenon. Jonathan kevin daly, thank you very much for joining us. S p downgrades six of the euros biggest banks. Who has to stand behind these guys when you get a financial crisis . Welcome back to on the move. Time to bring you some top stories. Rescuers are on the scene of a plane crashing in taipei. The plane crashed into a river after hitting a taxi. It is the second accident in less than a year for the taiwanese airline. The greek finance minister is in frankfurt to meet with mario draghi. He will meet with his german counterpart tomorrow. It is the latest stop in his European Tour to rally support for greek options. For now, the stocks are down 1. 42 this morning. Stocks in agent asia have rallied after a sixyear low in january. Many analysts are skeptical of the bull market saying the rally may be temporary. Another top story, six european banks have been cut by Standard Poors as the Rating Agency says their last two by the banks in a crisis. It hit the likes of hsbc, Credit Suisse and barclays. John, talk me about what is going on here. The story behind the downgrade and the timing. There are two things that are happening, one is the downgrades. They began a review after the Financial Stability board. And then the way they wanted to talk about making senior creditors take losses and ensuring the bank has sufficient senior creditors to do exactly that. You dont want a situation like what happened in cyprus. There werent any people to bail in. What they wanted to do was make them have enough senior debt that is available to be bailed in a crisis. That is one thing. The second thing that is happening at the same time is that certain countries including britain, have brought forward legislation in the Eu Bank Resolution recovery directive. It is all about the theme of making creditors take the loss. And not taxpayers. As a result of the new law s p has put some of the banks on review for a downgrade. Britain in particular says credit squeeze has been treated differently Credit Suisse has been treated differently because they are a Holding Company and in simple english they are fresh for the job. Jonathan so i was looking at a bank called rbs. 81 government owned. Are we to believe the government is a bank in the event of crisis . John it is a good question. It is to be seen. S p itself has since replied that the fsb asked for commentary on its proposals for senior debt. S p said it is yet to be seen what will happen in practice. Will the government let rbs have i think they would like to but it is very much open to question. Jonathan beyond that, look to the debt market. We had the big headline yesterday, nestle with a negative yield. When i look at the sovereign debt markets, there is really no correlation between the cause and the yield right now. Bank are costs, what is the story . John step back and you will see that senior creditors for the banks have never really suffered a loss. They backpedaled in denmark. Fewer senior creditors what we have seen is that when stress develops, people go oop,s maybe i am in line for a haircut after all. If you are a senior creditor at the greek bank or you know the government doesnt have any money, you knock the bonds down to 6070 odd, whatever it is. If you are subordinated creditor, for example the austrian banks, may have problems in Eastern Europe and they brought in the resolution directive, the subordinated debt went from 90 or 100 to whatever it was down to 60 odd. And the year one went down into the 40s. Jonathan the problem here seems to be that we move a little too late. John that is also true of these agencies. They are reacting. They dont lead the process they react to the process other people have put in trend. People that are driving this carriage are the regulators. The stability board, the ecb and the National Regulators of various stripes. They are driving the bus. Jonathan very true. John glover of bloomberg news, thank you for joining us. After the break, we talk about the danish centralbank. Some economists are saying another Interest Rate cut is imminent. Straight to denmark for conversation about that. Jonathan welcome back to on the move. I am Jonathan Ferro in the city of london. It is a domino effect. The weekend euro has more speculation as to who is next. The response from the central bank has been an emphatic. For more, lets go to copenhagen and we are joined by peter leverett. Peter, a series of rate cuts, how far will this centralbank oh when ammunition is left. Peter this has been an extraordinary week in copenhagen. Many economists expect we may get a rate cut later this week. Which would make the fourth change but the swiss made it for us here in denmark. The central bank has a fairly large arsenal of tools to combat this and basically they can keep printing money. They have been printing more than 100 billion krone in the past month. To prevent it from appreciating versus the euro. It seems like the central bank is not stopping, that they are just pushing ahead. They seem fairly determined to stop this. Jonathan i gave you a quick call this morning and said where our way . How aggressive have they been . And you said reserves are 30 of gdp impaired to 80 in switzerland. Clearly this has a long way to go. Weve only just started talking about this peg now. Talk to me about the history and how important it is to them. Peter it is one of the cornerstones of the danish economy. It has been in place since 1982 when a new centerright government came in and pegged the currency to the Deutsche Mark and it has been with us ever since. It has been a place to secure a stable crisis, it is not just a currency or policy collection tool. It is something that all exporters in the entire danish industry backs and the government and this opposition law says that even though some are against the European Union and dont think we should join the euro anytime soon if at all. Most people are actually backing the euro. Which may seem surprising compared to some of the fairly staunch euro skepticism around here. There is a brady broad backing politically industry wise there is a pretty broad backing politically and industry wise. Jonathan we have to leave it there. Thank you for your insight. That is most it for on the move the forego a quick check on the equity markets. You could not call this a selloff. Down 12 points on ftse, the dax down by 20 points. Continue to follow us on twitter. Doing a deal with draghi. Yanis varoufakis arrives in frankfurt to meet the ecb president. Will he get the Central Banks blessing for his debt plan . Slippery oil. The commodity falls after the biggest fourday rally in six years. And we are going to talk wages and inflation for the work and pensions. Good morning. The pulse welcome