Transcripts For BLOOMBERG The Pulse 20150930

London. Manus first up this morning, world stock markets are on track for the worst quarter since 2011. The last few months have been a volatile trading period. 11 trillion off the value of global stocks. Francine lets take a look on the quarter that was. The quarter to come, mark bar ton, may be a fed rate increase. Raisewill the fed Interest Rates . Futures tell us it is unlikely. Will we get more q. E. From the ecb . The Third Quarter ends. This is my favorite start of the day. The World Exchange market capitalization. The market capitalization of all Global Stock Markets. Have a look. This is the year to date chart. Look at the headline. It says what it says on the tin. Global stocks have lost 11 trillion in the Third Quarter, the worst three months in four years. A, chinas economic slowdown. And b, uncertainty over when the fed plans to raise rates. Of those twofect factors have been felt across all asset classes. In equities, only a handful of Global Stock Markets out of the 93 tracked by bloomberg have registered gains for the quarter. These are the equities. Estonia, onlya, five major equity indices have risen this quarter. Has been a widespread decline in asset classes. If you want to look at the impact on currencies, where better to look than the asian currency market . This is a bloombergjp morgan asia dollar index. On track for the worse quarter since the Asian Financial crisis in 1998. Worst quarter since 1998. Jpmorganthe bloomberg asian dollar index that tracks the regions 10 most active currencies. Devaluation was the trigger. The 15 drop in malaysias ringgit. Oil lower by slumping prices, the Corruption Scandal surrounding the Prime Minister of the country as well. Hammered byies were the slowdown and the chinese economy. This is the bloomberg commodity index, worst quarter since 2008. It tracks 22 rama terrace. 22 raw materials. The fit straight quarter, the worst run since 1997. The worstperforming commodity crude oil, sinking 25 . The longest and lowest quarterly average price since the start of 2009. Amid a supply glut. What a day, what a quarter. Francine what a day. And we have the german unemployment unexpectedly rising, hinting to risks in the german economy. Lets bring in the fixed income fund manager at ch just want to get your thoughts on german unemployment. Because we had a pretty terrible quarter for equity stocks. The quarter ahead, we are not sure what to expect that we know that a fed rate rises coming. The outlook for the eurozone is not that rosie if oil prices go back up. Alex the lower old price is quite a big boost when we have some of the Lowest Energy prices in europe. That should be positive. We do not know what the fallout from the volkswagen scandal and what is going to happen so, what it is going to do to the economy going forward. Manus the other big debate we have been having has been about glencore. Yesterday itll seemed as if glencore rocked Global Equity markets. The story will move on. But from a bond perspective, what does that do for bond issuers, what does that do for bond buyers . Because this is a bond and debt story. Alix here we have an Investment Grade company that has been trading with quite a large probability of default priced into the credit default swap market. We have not had defaults for, you know, pretty much since the financial crisis started. They have been running at a much lower rate. Manus a very real probability . Alix yes. Look at what is happened to the commodity complex, you have companies that have the wrong debt structure. Francine the reality is protracted low prices due to weakness in china or due to too much supply out there . Alix we have had our commodities rally from investment in china and to the emerging markets that has gone into a tailspin. I think to see prices back up where they were is unrealistic. Markets,big risk for or is it a biggest risk for markets . Fed beginning a cycle of tightening. What in your view is the biggest risk to investors . Alix the biggest risk is that the reality that we have in emerging markets and a complete change in the whole structure of whether feeds into developed markets. Not gone confidence and worries over defaults and so on, if that hits the good recovery, that we have been seeing in the u. S. And other developed markets, then that is a problem. Francine are you less worried about the eurozone or more worried . We have a strong euro. We have a recovery that is quite weak but it is led by consumption was makes you think it is robust. What are the main pitfalls . Alix you look at what is happen and we do not have the accesses building up the excesses building up. I will be in other parts of the world. The Growth Outlook there is moderately better than back a couple years ago. The eurozone does apart from follow from, the diesel cars and volkswagen issues. Francine thank you very much for joining up. Fixed income fund manager at schroeder investment. Industrial output fell in august raising concerns the economy may have fallen back into recession. It is a further challenge for shinsoo choo abe began his second term as Prime Minister. Speech, he left the audience in no doubt about his priorities. Prime minister abe the past most importantd challenges for me are economics, economics, and economics. Very resilient shinzo abe. James, a good day to you. Worse thandata was we expected. This is a must like his Worst Nightmare coming home to roost, isnt it . James thats correct. Is much worse than expected. The government last month was predicting its rise at 3 . Highly correlated with gdp. We have got today. And then you look at the gdp japanit is likely that went back into recession in the Third Quarter. A lot of economists saying that. Thisll be the second recession abe became Prime Minister again. Even though he says his priority the economy,ee is he is not doing a good job of achieving Economic Growth or stable Economic Growth. Hascine i think jpmorgan noted they expect the boj to ease on october 30. Is this more likely if we think which it that japan is a recession again . James we are seeing a lot of people, government adviser saying the government should bring in a fiscal stimulus package, which is probably much more likely now after todays bad output data. Whether the fear of a recession causes the boj to ease more is another question. The governor sees the price trend increasing even with the contraction in the Second Quarter, he says he is satisfied with how prices are going. So it may be that the governor says, yes, the economy is contracting but actually we see inflation where we wanted to be and therefore, we do not need to ease. He was saying the same thing last year at this time when he said the prices were on the right trend. The boj was happy with what was happening. At the last meeting of last year, he came out with a massive increase in easing. It is always possible he might do that again one year later. Francine thank you so much. In tokyo. Alix stewart is still here. Do you have any value to be made in Japanese Corporate bonds . Alix Japanese Corporate bonds is not a particularly liquid market. I think some of the opportunities are more likely to be elsewhere, given the valuations that we have, the selloff we have seen in the likes of the dollar market, for example, which is trading at twoyear lows. Manus if we look at biggest issues to come marketsi,n alix, it is about the prospect of more quantitative easing in europe. What does that do to our bond markets . If anotherpan, round, october 30, you said, the jpmorgan note francine they are not ruling out the possibility of additional easing on october 7 but they expect that boj to do something october 30. Manus what were looking at is the prospect of more quantitative easing, europe and japan. From a Bond Investors point of view, where are we . Negativeare seeing inflation prints again in europe. Weaker data in japan. The expectation is that the ecb and the boj will have to do more. The question is whether people believe quantitative easing is working. I think in this environment of low inflation, the questions over growth, bonds are pretty decent investment. Francine thank you so much. Fixed income fund manager at schroeder investment management. We have plenty more to discuss where that story goes is anybodys guess. Lets get on to our radar. What is up there this wednesday morning . Glencore. The manager will meet debt investors later today. A selloff given by concerns that the Company Holds too much debt to withstand the falling Commodity Prices. Stocks have slumped by 70 since the start of the year. Francine u. K. Insurers face huge exposure to a change in china policy. Delivered byrning mark carney less like your he more countries to do more to come back the Financial Stability risks of climate change. Concern wouldur be if it were to occur suddenly, could destabilize rocyclicalark a p crystallization of losses and tightening of financial conditions. Manus Consumer Confidence has phone this month with it the come in the gloom is this year on the outlook of the economy. We await thee as final reading of the Second Quarter gdp. We get that at 9 30. Just under 17 minutes. Francine shares in chinese automakers have risen after beijing cut attacks on carbines car buyers. Suv maker andt the Largest Electric carmaker gained. Moves by the Chinese Government follows fives months of falling vehicle prices. Manus in a month, the first model suv. Electronicas two all vehicles in production at the same time. The model s features double hinged doors that open vertically. Emergency braking, and 17 audio speakers. Francine up next, what will glencore management tell investors . That after the break. The real question is what will investors grill mr. Glasser burke on glasenberg on . We will discuss that next. Manus welcome back. This is the pulse live on bloomberg tv, radio, streaming on bloomberg. Com, your tablet and phone. When corporate the management will meet debt investors later today. That is a corner to people familiar with the matter. It comes after a selloff driven by concerns the company has too much debt. Glencore. Joining us now, the man tracking the story. Jesse, what a turnaround. Up 20 yesterday. The equityis investors seem to have their faith restored. Is it temporary . Jesse good question. Commodity prices will have the final say. Two key things have happened. Firstly, the company said something. The market was looking to allay fears. The key line is they have positive cash flow and no solvency issues. That is key for glencore. Above 5,000 a ton. That is key for glencore. Copper is 40 of their earnings. Over 5000 inhat back the investor base. Francine we know there is a meeting between debt investor and managers today. What is the key risk . We talked about the debt. What about the Commodity Trading aspect of it . How much do we actually know . We had a story saying that this was probably some may be considered opaque. If you are an investor, what you expecting to hear from glencore . Jesse the key thing for investors is the prices have blown up considerably. There is a fear perhaps among those investors that some of these credit lines may have been pulled of the counterparty risk associated with that. There is a meeting in london. The cohead of Corporate Finance will be meeting some of these debt investors. Hastilys we know, a arranged meeting. Some of those investors have a number of qualms and fears about what is happening there, and management looking to calm the nerves. Francine manus lets bring alix back in. When you see this kind of route, on a formerly investmentgrade company. An Investment Grade Company Trading as junk. There still is a correlation there. This is in the commodity sector. Bond investor, when you talk to Bond Investors, that remotely would drop anybody towards this industry or this sector . Alix you have to have some kind of clarity that prices have boughttomed. The fears over what is happening in china it does not give anybody that kind of clarity at the moment. I think most commodity people are little bit more positive on copper. But it still held up relatively welcome to other ones and that is key for glencore. Francine this is pure speculation but if it were to actually be broken up, what they have bias for copper mines . Yeah, i think so. There is some high quality in south america. Positive cash flow. Still one of the most attractive commodities in the space. The company is not looking to sell metals or coal assets. The ag business and Precious Metals but investors need to be convinced they are going to take more dramatic action. Was a 25 of the debt . 25 of the debt and the credit lines all combined, matured. That is when you are slightly up against it. Jesse way of had an interesting note from a quarry this morning saying that at current spot prices, glencore will have to manus that is a 10 billion target down to 14 billion. Jesse they will have to widen it again by another 5 billion. Francine is anything that looks attractive at the moment in the space . Is there an industry group, is it services . May be some of the mining stocks that still looks attractive . Alix what we have seen in the selloff, anything with emergingmarket risk or in the auto sector in the commodity space has been hit quite hard, but we have also seen some pretty decent companies with good cash flows that are more into the kind of more consumer areas. Some of the Cable Companies that are looking pretty attractive. They to not have the risk in these areas. Yet, they have also suffered in the negative sentiment that surrounds risk as a whole. Francine thank you so much. And of course, bloombergs commodities reporter. You can follow jesse on twitter. Last, ok, now, at after a twoyear delay, the tesla suv has arrived with a pretty substantial unveiling in california. Here with little bit more on the hyde. Del x is caroline it was all lights, but does it look and act like an suv . Caroline people questioned how much like a sports Utility Vehicle this does actually look, but what timing. You have got to ask yourself. Two years delayed by to pick the time when were in the midst of socalled dieselgate what a tim e to unveil a nonpolluting electric vehicle with zero admissions. The bang for the buck. 132,000 is the baselevel. For that, you get 250 Miles Per Hour charge. Your managing to beginning up to speeds of 155 Miles Per Hour. Even up to 60 within 3. 2 seconds overall. It has got more precision. This is where the competition comes because there are quite a few electric vehicles. Bmw also, perhaps the surfboard and any other skis you might want to put in the back of your car. Notably, some of the things that money can buy you. And you get the allimportant zero emissions. Francine the challenge is to reach the target. How will eli must do that . Elon musk do that . Caroline this is twoyears delayed because they were focused on some difficult technical abilities of this car. This car has the biggest piece of glass of any car ever. There are some difficulties pretty middle seat row is complex. To deliver 55,000 teslas this year. They had to backtrack from the higher end of that target because of the competitive the complexity of the model x. They need to roll out 28,000 in the second half of the year. That is a very quick ramp up to be able to be getting these cars off the ground. With these complex doors. Vulcan wing doors, they are called. They swing up vertically. Very hard to deliver but we only have understand 25,000 model xes are on order. You have to wait eight to 12 months to get a hold of them. Manus thank you very much. A the letter a balletic grace. Francine Facebook Says it is building a strong base in china. Sheryl sandberg said disneys is they helpedand numerous local companies connect with consumers abroad. Censorship prevent users from using facebook . Weve been clear that our mission is to connect the world. A lot of people the world live in china. You cannot do one without the other, but any kind of timeline we dont know. Francine Edward Snowden has joined twitter. The biography of his account says, i used to work for the government. Now i work for the public. The only twitter feed he is following is his former employer, nsa. His first tweet said, can you hear me now . We already had more than three quarter of a million followers. The nsa has fewer than 100,000. Francine ralph lauren is stepping down. With sales growth fading, the stock down to 44 , and lauren days away from his 75th birthday, company has named Stephen Larson as the next ceo. Jumped 5. 6 . K francine manus up next, we check in on u. K. Growth figures. We expect growth of. 7 . Gdp andoing to talk just reminder you can follow us both on twitter. Im manus cranny. flacqua. E is manus awaiting gdp data for the Second Quarter. It looks like the economy grew by. 7 , matching the earlier estimates. The u. K. Economy growing by. 7 . Gauges important, the key of wealth in britain has risen above is pretty recession peak. Workers are seeing the compensation rise at the fastest pace in 8 years. 6 abovead was its level in 2008. The economy grew. 7 . Unrevised from a previous estimate. Net trade driving the expansion. Compensation rose 4. 7 from a year earlier. The biggest increase since 2007. With a flechette near a record low, real disposable income with inflation near record low, disposable income jumped the most in three years. The figures reinforcing the view that britains economy which has grown for 10 straight quarters is continuing to grow. 7 for the Second Quarter. There you go. Manus ok, mark, thank you for wrapping up those Growth Numbers for us. The second7 in quarter. President putin has gained approval to a ploy armed forces forces in syria. This comes two days after putin met with president obama. Lets bring in gregory. What does this mean . Gregory this is formal authority for mr. Putin to use russian forces. It looks like it will begin at the beginning of russian air campaigns. Against Islamic State targets. Although the russians have not made clear entirely the details what they are going to do. Francine so, what does it mean for mr. Assad . This is the situation and what we have been talking about. Barack Obama Meeting vladimir putin. The fact that russia will intervene in syria, will have consequences for the syrian president. Gregory russia deployed 2000 troops in more than two dozen airplanes over the last couple weeks. That was a big show of support for mr. Assad. His forces have been struggling on the battlefield. The signal they are sending is that they are not going to give up support for mr. Assad. Thats complicated the diplomacy with the west. The u. S. Clearly argues that assad is part of the problem, the russian see them has a solution. That solution will be put off in the short term as russians begin military strikes, assuming those strikes are targeting Islamic State and not the antiassad rebels. Francine Gregory White in moscow. China stocks have suffered the biggest quarterly loss since 2008. As the government struggled to halt its market rout. It showed signs of a sharper slowdown. The shanghai composite index tumbling 20 since the end of june. The biggest loss among benchmark the chineseobal stock market will make a comeback. Ipongeputy ceo of ha securities. A pleasure and honor to have you in the studio. You understand what is going on in china. How surprised were you by the correction, and are you confident this will not happen again in two months . Yes. This happened so suddenly. Not only is our persistent market but also our regulars are also surprised. Our regulators are also surprised. Even how big an influence in trading. [indiscernible] we did not know how much left related. So, after three months we tried real hard to fight. Small, mediumsize Internet Companies try to connect with some brokers. They have more five or 10 pounds leveraged. Manus one of the arguments is that the state is supporting this equity market. The state funds have spent 250 billion. When that comes to an end, are you confident the market has real value without that state funding or will that state funding need to continue into 2016 . A lot of argument and some about that. From my point of view and if, sets might be in some financial systems. Some equity firms, some banks in trouble because of liquidity issues. So, i would say after two or three years, for my understanding, we stop that and spent some money, but [indiscernible] we never did that before. Francine are you concerned about a credit crunch in china . Hiroki we still have a long way to go. I believe it takes time. I had to say the market gradually stabilized. More than six months. Might be nine months. For the moment, might be one or two years to get confidence back. But like other markets happen before. Inter such a big selloff particular case, regulators have to seek otu a ne seek out a new way to figure out what happens and what is wrong with it. Give foreign investor some time to digest that. Manus there were many policies enacted. Rate cuts, changes in the regulation. What i want to know from you as somebody who bridges a page in asat market, has the somebody who participates in that market, have they learned how to deal with the under or is xi jingping more pressure . Hiroki all our regulars got a quicksson from such a turbulence of the markets. That, i would say, after might be more fluctuating among banking sectors. Insurance sectors. There might be a new integrated hed financial in t Financial Market in the future. This even might make that accelerated. Ast questione l because you seem to suggest that, of course, the government or the pboc was right to intervene because otherwise things couldve gotten ugly. Do you feel confident the pboc has this in hand . One of the big wars from the outside world, from the west, is that it is a huge Transition One of the big worries. So, further huge corrections and stock markets will happen. Do you feel confident this is not the case . Were gradually building more close contact with her International Financial institutions and regulators like Central Banks. To pay more attention to globally what happened in china, the equity impacts in other markets. Example, we, for are talking about london, the shanghai composite. There will be a new program to connect to the chinese market. It will be very good and positive for people to gain confidence. And also, for the global allocation of chinas domestic asset management. Manus thank you very much. The deputy ceo of haipong securities. Francine gauging growth. The World Economic Forum Releases its local competitiveness report. We take a closer look next. Francine welcome back to the pulse. Here are some of our top headlines. Manus world stockmarkets are on track for the worst quarter since 2011. Last three months have been a period of volatile trading. In a white 11 trillion off and it wiped 11 trillion off of global shares. W, japansno industrial output fell for the second straight month in august. Concerns theses economy may have dropped back into its second recession since Prime Minister shinzo abe took office. German unemployment on a spectrally rose in september. The federal labor agency has said joblessness increase by 2. 8onally adjusted 2,000 to million. Economist for digit unemployment in europes biggest economy would fall by 5000. Francine contrasted to the Unemployment Rate britains Unemployment Rate declined to its lowest level in 2. 5 years. It dropped to 11. 9 signaling the countrys labor market may improve even faster than the Prime Minister has predicted. The base for the two countries are so different. It is difficult to compare. Manus lets talk about the World Economic forum. They released their annual Global Competitiveness report. While its better news for advanced economies, it is s hort productivity growth threatens further economic expansion up into talk about the head of Global Competitiveness and risk. Theis the coauthor of report. Great to have you with us. The top line on her story we have got a bloomberg. Com, switzerland beats singapore and the u. S. In the top competitiveness ranking. What if they got . They have strong fundamentals in place. Very strong institutions. Longterm strategy. Good infrastructure. In comparison to many european countries, solid Macro Economic outcomes, good Public Finance and flexible labor market. Francine im surprised. These are structural things, and yet they have a shoot a huge how do you remain competitive . Are they quicker at adapting . We talk about the global currency wars. It is amazing to see the last figures resource when were not as negative as we thought. We can see that competitiveness this is one of the things we have seen over the past seven years. The countries that were on top in 2007 had weathered the crisis better than those force the bottom. Manus there is a great debate. Again, asto the boil to whether we are facing the return of global recession. Carl icahn has warned us about markets and Larry Summers procrastinates about secular stagnation. This report, does it give you a good outlook in terms of where we are in the world of competitiveness and in terms of growth . Reta what we see is we are in a new normal. A lot of stability in the rankings. Not a good thing given that we are in the in the environment and what we look at is productivity. We should be seeing more improvement, especially in a marking in emerging markets pick the smaller markets are doing quite well. They improved a little bit. China remained stable this year. So, we see some challenges in emerging markets. A lot more should be done in terms of Structural Reforms to ensure future growth. Francine im surprised that we talk about productivity. And we look at the u. K. In the u. S. , productivity should be much higher. How do you interpret it . Is it regulation that is putting a burden on Financial Markets . Is it the fact that we work longer hours but are not as focused as much . It is very difficult. This is what the Central Banks are watching. To understand the robustness of this recovery. It, some ofome of us saying that many of us, recent innovations we do not see reflected. Itshe same time, Structural Reforms to a large extent. The last seven years have seen Structural Reforms in all the countries in the world. Manus one of the great global debates. Interview finished an is china. China ranks number 28. You said clearly that recent market relevance, the yuan, the stock market crash, youre not landing, aa hard soft landing. What is this report telling the world about china . Is 28. Ta it a fairly good position in terms of large emerging markets. It is the lead of the brics economies, improving the previous years. From our perspective, china has many good fundamentals that bode well for chinas region. Able tol us it will be handle the shocks coming up relatively well and better than some of the other emerging markets. Francine which ones were you the most worry you the most . India is by far the strongest. The Interest Rate cut yesterday. Is there an emerging market that you think we should worry about for the next 12 months . Margareta the one dropping the most is brazil. Of changes in institutions and also on the Macro Economic and fun. These are issues that do worry us the Macro Economic environment. Me warning have so flags up over japan. And the u. K. The is it thats productivity issue comes back to risk in the united kingdom. Weve debated that. Is that what is causing us problems here according to the report . Margareta for the u. K. , in particular, the two issues that stand out three issues. What is Public Finance. And then more products related, quality of education. Anything at least more research and develop. Development. And we see access to finance is as difficult. Innovative, technology companies, many good things about the u. K. Francine think you for joining us on the program today. Head of Global Competitiveness and risk at the World Economic forum. Manus ok, we have had a nice bounce of these markets. 11 billion 11 chilly. My billions and my chileans are getting distorted my billions and my chileans and my trill ions are getting distorted. Trillion wiped off the balance of Global Equities. This is market capitalization in dollars. This is a chart that is a market cap of every single Global Equity market. 11 trillion has been wiped off the value of Global Equities. The msci world index has had its biggest quarterly decline in four years. Bottom of the Global Equity part is pile is china because of the devaluation in the yuan. The shanghai composite falling by 208 . Of currencyy slumped because of the china devaluation and the prospect of higher u. S. Interest rates. Looking at the asian currency market, this is a Bloomberg Jpmorgan asia dollar index on track for its worst decline quarterly basis since 1998. Look no further than malaysias riggit to see the worst ringgit sinking by 15 . By politicalwamped scandal, declining oil prices and the declining china economy. I wanted to look at bloomberg commodities via our commodity index. Slumping china has hit the index every single commodity on this index has fallen in the quarter. By the eway, it is the worst quarter since 2008. A quarter full of superlatives. Francine thank you. Mark barton there. Coming up on the pulse, could the American Government shutdown . Hashouse of representatives hours to pass a spending bill to keep the government running. We go to hans nichols, the export on anything the expert on anything congressional to do with d. C. Manus welcome back to the pulse live on bloomberg tv, radio, streaming on bloomberg. Com. Francine china is using the mortgage requirements. This is interesting because we were concerned about an economy that was overheated. We talked about that with the deputy ceo of haitong securities. They went through massive turmoil in the last couple months. The fact that they are loosening the mortgage requirements may have an impact on overall demand. We had a real estate bubble in china. Something we have to keep a close eye on. Manus we have that release from the chinese on their automakers spirits of major moves in the automakers. Domestic automakers on china. The levy on autos with engines of 1. 6 liters. Many maneuvers on top of the big moves they did a month ago. Statese the United Congress post later on whether to fund the American Government. Hours to spare before a punt potential shutdowna. Hans, will congress that the Government Shutdown again . Does it look likely . Hans yeah. It looks like we will have a deal later today when washington wakes up. The house has to vote in the senate. That does not forestall a big fight. All thelikely be punted way down to december. What you have is a socalled lcean funding bill passed today. If that passes today, that get you through a couple of months, but at that point, Speaker John Boehner will no longer be in charge. Remember, he announced his resignation on friday. The question is and i suspect this will dominate the conversation for the next couple days can Majority Leader Mitch Mcconnell and barack obama ,ome together on one final deal may be fun the government for another two years . Mitch mcconnell, the Senate Majority leader handed hinted at that. For bothe to settle year so that next year we can have a regular appropriations process. The president as Speaker John Boehner and i spoke about Getting Started in discussions last week, and i expect them to get started very soon. If this could be John Boehners last sigh, it would make things easier for the congressional parties, trying to make the trains run on time. There is a chance that the closer we get to the president ial primary, the caucuses start in february in iowa, president ial politics senateill into negotiations. Senator cruz and senator rubio, their agendas diverse from the senate leaderships. Manus if you as you said, as we get closer to that moment of when the election boils up, may be somebody asks donald trump how many immigrants he hires in his businesses . When he gets to that point, do you think any of them will run the risk of banner waving at that level . Hans absolutely. Ted cruz has every incentive to sort of rile up his base and make a play for iowa and conservatives in New Hampshire by shutting down the government or going after unpopular programs and shutting down the government could be a hostage collateral. I think you need to watch the senate on a different dynamic. The financial dynamic spills into the senate. On the house, you have the more demographic project and that is the challenge of where the Republican Party is going. Is ist a divided party . Francine hans nichols, the former white house correspondent. For our viewers, it is the second hour of the pulse. We will talk to tom keene. Looking at eurozone inflation. We will be talking about playbus and china. That is all coming up. Francine taking stock of world equity markets, they are prepared to deliver their worst quarter since 2011. We look ahead to what q4 might have in store. Facetoface, meeting with investors over concerns. The land of the setting sun, the specter of recession looms over japan and Industrial Production slumps for a second month. Francine welcome to the pulse. Live from bloombergs European Headquarters in london i am Francine Lacqua with manus cranny. Tom keene is also in new york. Tom a lot of Economic Data coming out. In america we look at three days of jobs data culminating in fridays jobs report carried we will turn to the American Economy later. David rosenberg will join us. Francine im looking forward to it. Was brutal. We have been talking about tion, and, disinfla deflation. Your area of inflation falling to 0. 1 . We were expecting 0 . This has huge implications for mario draghi. Tom everyone laughed at bob janjuah. He has been dead on. Were looking forward to talking to him. Francine he has been dead right. Very quickly on inflation, how worried are you about deflation . Janjuah first of all, everyone laughs at me anyway, even at home. The longterm things are about demographics, technology, globalization, and debt. I think it is coming home to roost. I think inflation deflation is the primary problem with the world. Francine the world stock markets on track for the worst quarter since 2000 11. Lets look back with mark barton. Of globalas wiped off equities . 1 trillion . Have an 11 trillion stock from Global Equities that has been wiped. This is the bloomberg wall of Exchange Market capitalization. It is stock markets around the world. 11 trillion wiped because of china, because of concerns about a fed rate hike. Only five indices have a written. Look at asian currencies, on track for the worst performance thee 1998 on concerns of fed and because of the china economics loading. Francine commodities were battered. Mark there were absolutely battered. We have a wonderful index called the bloomberg commodity index. They have not fared this badly since the height of the financial crisis in 2008. This is the bloomberg commodity index. It is better late than never, the worst quarter since 2008. All 22 fell on this index, gold quarterly losses five quarters. Worst losses since 1997. Worst commodity, crude oil, down 25 amid the supply glut. European andring asian bonds. This specter says of inflation is the worst thing. Inflation seekers falling to zero point 1 . The problem is Central Banks cannot find it. It is driven by commodities. It is important deflation. Know we will talks about at length in this hour about the idea that are some point lower Commodity Prices are a benefit to most of society. We are clearly not there right now. You can see as we stumble into the next quarter, it rolls over into fed policy, and the fed like mark carney at the bank of england had to blink. Maybe it was the september blinking in the Third Quarter. You wonder if we will do the same thing in the fourth quarter. Francine bob janjuah, that is a cue for you. Mr. Janjuah the Central Banks do not think any central bank anywhere in the world needs to hike. I think that the fed my try to something inet december, but i think it would be a very short cycle. I think in the long run, and this is something im working through, if i summarize in this way, the last six years have been a huge benefit to the Financial Sector, the financial whereas the real economy has lagged behind. I would not be surprised if over the next few years, two, 3, 4, five years, Financial Markets go sideways. I think that the real economy could end up tom do your work over the years, because of the fragility of the system, are we ripe for shock . What do you think the outside shock will be . Mr. Janjuah some people are suggesting that perhaps glencore, vw, i dont know and i will not comment on individual companies, but i think the kind of shock that we should be concerned about is china using the currency to try to get a bigger share of the global qro the Global Growth pie. I do not think anything will change for some time. Theres too much capacity globally, and not enough me have sorry, let been. The shock will come from the federal reserve, right . We have been fighting this for 18 months. 11 trillion wiped off of the ofity markets means that out almost 60 trillion the markets are so huge. You believe the central bank should not hike this year . It could be perceived a shock when they do . Mr. Janjuah if the fed were to hike, i think the hurdle is very high. The only reason they would do it is to try to send some kind of confidence signal to the market. That will be a take away it from the response to the market last week where there was a groan of disappointment from the fed. I think it was lost by the way. Im not too focused on a fed hike in december. If they do it, i think it will be one and done. The bigger issue is the market. And ultimately what the world is missing is credible fiscal policy. The problem is that the one do itry that can is the u. S. You have a president ial election cycle ahead of you. I didnt i dont think president obama will convince congress to put a fiscal policy in place. Tom we have a fiscal gridlock. New pricing, if it is glencore, copper, or a twoyear yield in the united states, using the normal mechanisms clearing markets to move on to a better Global Economy . Mr. Janjuah i do. I think we have to be coaches of the fact that market liquidity will make that process more difficult. That is the kind of regulation backdrop that exists, and has were six years. I think well get there. I think well get to a better place. Another way to describe it is we had a big equities selloff in 2001 and 2002. We had a similar percentage move 2 thousand 8, 2009. Ahead of us is more akin to the 2001 kind of moves. It will require a lot of price changes, price moves, but i do not think it will be systemic. I think that the key thing is in the banking sector, it has been slow and effectively regulated. I do not think the risks are therefore Systemic Risk from that sector. Francine thank you so much, we will talk about this lack of liquidity with bob janjuah. He is from nomura. We are on fed watch. The bank of st. Louis president are all speaking today. Output industrial selling in august raising concerns the economy may have fallen back into a recession. A further challenge portion joe of a and further challenge who just begin a second term as Prime Minister. The date it was bad. Increases pressure on the bank of japan. They may need a fiscal package and extra budget. That is dated to get consumer spending, whether it sways the bank of japan is a different matter. We know that 1 3 of economists process of increasing stimulus when he meets on october 30 with his policy toward. Francine jpmorgan is calling action for something in october, something on october 30. In may, soon as october 7. That is a possibility. There are a few calls were as early as then. When we look at october 30, the bank has a chance to revise its inflation and growth forecasts. That shapes up as the more likely date. Governor kuroda always likes to surprise the market. Francine brad miller in tokyo. Bob and tom are with us. The doj needs to do more, is it better to do it quickly . October 7, or can they wait until the end of the month . Mr. Janjuah i think they need to move this quarter or this coming quarter. I think the sooner the better. I do not necessarily think it will take japan to the outlands of Sustainable Growth and inflation. Dothe bank of japan and abe nothing, that does not put japan and a good place at all. Tom i looked at the zero bond for japan. It goes back 16 years. They have tried twice to raise rates. As you know, they were embarrassed of had to move back to reverse to the zero bound. Is that is the is that the ghost that haunts all central bankers . Yellen or janet is the idea of raising rates, being embarrassed, and having to reversed . Mr. Janjuah you nailed it. You have seen the economic history. I always refer back to 2000 seven and 2008 when the crisis of corrupted and we talked about qe. There are academic people that say if you go down this route you get caught between a rock and the heart race. That is where we are between global central bankers. The only thing that can help us now, i really believe, is sustainable fix go a suitable fiscal action by government. The corporate sector, it is not invested heavily in itself. It has bought stock but not invested in itself 45, 6, 7 years. We have too much capacity, still. It has to come from governments. Francine we will talk more about this, going back to the idea about coldfusion. The fiscal policy might have to replace Monetary Policy wintools run out. Bob janjuah from nomura stays with us. Manus it is never far from the top of the news, meeting investors later. It comes after selloff debt driven by concerns the Company Holds too much debt. Holds to much debt. Trading is up over to percent. Stock in the Supermarket Chain braintree is up since 1988. Earlier the u. K. s thirdlargest grocer said that profits will be moderately ahead. A quarter thatto slightly beat analysts estimates. A gauge of wealth in the u. K. Has written above its prerecession peak. Slightly ahead of the Second Quarter with 0. 6 , above the level in 2008. Workers are saying compensation rising at the fastest pace in 8 years. Suv to honorsl x in california to owners in california. It has double hinged doors, automatic atomic breaking, and 17 audio speakers. Francine 17. What will glencore management tell debt when they meet later. We will discuss that after the break. Francine welcome to the pulse. European bloombergs headquarters in london. Glencore is up 13 . They will be meeting with investors later today. There are concerns the Company Holds too much debt. They have that concern for a while. We do not know if theyre are able to withstand the ball in commodity rices. Inwithstand the fall Commodity Prices. There is a lot of concerns. Were down 30 , then gained 13 . Is there something that management can say that can rancher investments . Out athey finally put statement yesterday afternoon to reassure people there is no fundamental problem in the business. It has turned sentiment around for the time being. Francine tom . Tom i would that glencore, is it at 1. 35 per sha re . This is a penny stock. What do they do to get a penny stock up to a dollar stock, say five dollars a share, what do they need to do . Will i think that when we look at glencore, what people need to focus and is the price of copper. Copper is the biggest commodity. It all depends on the copper price. If you want to know what will happen, keep your eye on copper. If copper spends time below 4000 or 5,000 a ton, the problems will not go away. That is the key. Francine i know the copper story, and we will ask bob, but there but is there a concern about the trade . Is there a chance this company will have to be broken apart . With glencore was to take a modern Mining Company and create trade. What has happened is that owning the minds have given them copper, and no matter how clever they are, it is hard to trade away that it a bear market. Keeps falling, 15 , a 15 month low indicates going down. What about recovery . Will it take years when supply taken off because of lack of investment . Mr. Janjuah i think so. The other side of the dollar is Commodity Prices. Do i think that there is a lot of pressure for the dollar weakening against the world . No. If anything i think em will try to devalue. I think most of them, japan and the euro zone, would not like to appreciate too much against the dollar. I think if the dollar keeps globalating, and the access of supply over demand, prices will fall. I do not know copper that well, but crude is what i focus on. There were reasons last year 40 i felt it would fall to a barrel. I think 30 is very doable. That is a whole another realm of getting out there. Francine thank you. Will kennedy from bloomberg. We will have more questions for bob janjuah. Is suing aar state carmaker for raising pollution levels. Anothercongress sets vw deadline. We will talk about the carmakers state side struggles, next. Francine welcome back to the pulse. Bloomberg tv and streaming on the ipad at bloomberg. Com. Lets talk with the cars that have launched after a twoyear delay. Tesla had an unveiling in california. Here is caroline hyde. This is very exciting. We have been waiting for 2 years, and it comes at a crucial market moment. Caroline what a timing. , ande midst of the scandal outcome of americas version of an electric vehicle. You can not have sweeter timing, even though it is two years late. It is the first of luxury electric suv in the market. It is 132,000 base price. What was being displayed today was phenomenal. Single charge, you can get 155 Miles Per Hour, very quick speeds very quickly. At females anded families because it fits sixseven passengers. Some of the beauty that the car is offering. My favorites are the doors which open vertically. Francine how that is familyfriendly im not sure, being the mother of 2 small kids, but we will see. Thank you. To hans nichols. As caroline was saying, norway has become the latest country to be embroiled in the whole swag and emissions scandal. She made the point this is great for tesla because they came out with a new car while volkswagen is still embroiled in scandal. Lets talk about where the next volkswagen deal is. Bes 147 vehicles will affected. There is a suit in harris county, texas that is 100 million. Im not sure how they arrived at their math. We will see if they get support for major he or judge. We have the macro picture from the bank of america. Andeffect on gdp in hungary the czech republic, if the gdp is bad. Romania and poland less than zero point 5 . There could be a real gdp impact for Eastern European countries as a result of the volkswagen scandal. Francine thank you for keeping a close eye on this. Hans nichols in berlin. We talk to the founder and ceo of a company that can help customers create that elusive on social media. We are talking about a meeting yesterday and buying a huge chunk of media insider. What that means for the future of the muse industry. That is what will be discussing next. Francine welcome back to the pulse. I am Francine Lacqua with manus cranny. We are looking at disinflation and the markets. It says something worldwide about where we are as we begin the fourth quarter. The october meeting of the fed is considered to be not such a big deal as everyone is still focused on the inflation data and the jobs data as we move on to december. Francine we will have more on that. A top story for more on our other top headlines, here is manus. Manus going into the fourth are on trackets for the worst quarters since 2011. The last three months at then volatile. Almost 11 trillion off of the value of global sales. The shanghai composite, fell 29 making it the worst performance of a major index. Market industrial unexpectedly fell for a Third Straight quarter. Some are concerned the economy may have dropped into a second recession since Prime Minister abe took office. Attention now turns to the bank of japans business policies. Glencore management will meet debt investors today after a cell of driven by concerns that the Company Holds too much debt and cannot withstand the fall in Commodity Prices. Sales have slumped more than 70 since the start of the year. Elon musk has handed over the first numeral six model x suvs in california. He now has 2 electric thecles in production at same time. The double hinged doors open vertically, Automatic Energy breaking, and 17 audio speakers. Francine 17. If you want to have really loud parties in your car, you can. Lets check in on the markets. Jon ferro has the latest. Jon the top headlines in the market. You all look up to the same headline. The worst quarters since 2011. The old is stumbling. Trying to have the last word. Gains on the periphery. Battered by the mining index. The stoxx 600 down 30 . We rebound this morning. All of that pessimism, there will be a pocket where things get done. You look at expectations versus reality, they will beat expectations here today. The sales are popping aggressively by 12. 8 this morning. This morning, it is not about individual stocks, it is data. Euro zone inflation data, 0. 1 . The bond market to be specific, 0. 6 . Maybe the bond yields are not that crazy given where the inflation is and the argument it is not going to bounce back anytime soon, despite what the central bank might have in mind. Thatch for 2 Central Banks are really going to be in focus. dollar was not unmoved. The had my number was disappointing, but the core figure, when you strip out inflation, euro. 9 here and went to respond . The plug will be pulled on more ecb. The second currency pair, i reached for the dollaryear and. The dollar yen the prospect of a second recession for Prime Minister abe. Whatever happened to the success of abenomics . Everyone is looking for the boj to do more. The boj will use on october 30. 120. R yen back through francine it could come as early as october 7. We have seen stories shared on social media we have to click through. A next guest is the founder of a company that connects users to what he calls interactive storytelling. Playbuzz founder and ceo, welcome to the program. Has a lot of quizzes. I guess this is one of the things people and investors are excited about. You have moved to new york. This is growing. You had a round of funding. What comes next . Are you looking at ipoing . Mr. Olmert we are very focused on empowering thousands of publishers, video organizations, and to storytellers, and providing them tools to great stories. We have quizzes, slideshows, rankings, and packages that we provide in order for the worlds best storyboards to create content that is datadriven and is optimized for user consumption. Francine what is your concern when you are a startup in this kind of environment and are doing well. You have to make sure you are not over reliant on a single source. Are you to reliant on facebook and are you concerned you will have to put up a pay wall . Mr. Olmert facebook, social networks in general, and facebook is the undisputed ander, they are playing Important Role in quantum discovery. Theyre not going to websites directly, or not as much as we used to. We stumble upon content because of social media. As i mentioned, we work with tens of thousands of publishers. They all receive a good portion of their traffic from social media, they spoke specifically, which puts facebook in a strong position of power. Following the news about recent developments in the way that facebook interacts with content, or the way they package content for users, facebook will play a significant role in the way that content is served to consumers. Francine how do you look at this . We will talking about Central Banks and how they look at product to video. These kinds of companies are not really put into the productivity you do not know how to account for this. Mr. Janjuah one of the big issues, not just for central bankers, but what we have all missed is technology. You are a part of this revolution. For the consumer, it is a wonderful thing. It has made things cheaper and more accessible. The flip side is that the Pricing Power we are in a bizarre world where more Central Banks need inflation. Inherently disinflation inflation. At the end of the day, for consumers, this is a great thing. We are an economy that is in the middle of a massive adjustment. We have to get used to this, the Pricing Power. Francine do you look at bigger companies, have you been approached by anyone . This is kind of old world meets new world. How much do you understand each other . Mr. Olmert we work with the majority of the large media conglomerates of the world. Nbc, fox, aol. The states we have other Media Organizations. I think the market is disruptive. This is when organizations feel users are changing the way they consume information. Find new waysd to to find users. We are there to serve that. Deductionre is great by the oldschool Media Organization as they realize in order to stay relevant in a world where companies that have emerged only a few years ago are becoming more companies havee to give more for every dollar of revenue they take in, right . Francine the old model, it cannot survive. Mr. Janjuah your model relies on inefficiency . Mr. Olmert the old world is devolving. Byre is a great deduction Media Companies to those new models. We are only seeing the tip of the iceberg of the changing media landscape. We are grateful that playbuzz can be a part of it. This quiz,ou have what kind of instagram are you . Do you instagram . And you look at some of these quizzes, what surprised you the most . What kind of content do we want . Are trying to optimize that every story has their own story. We are using the Financial Sector with Companies Like cnbc and entertainment companies. We are creating the platform for the content. I think the question that we are trying to optimize the kind of content that eventually gets shared. Content that people find the urgency not only to consume, but to share with others, increasing its popularity. Broadcasting the mentality of one too many, saying something and the entire world can hear or listen, is changing into more of a onetoone. Media organizations need to cater to every consumer individually rather than one message to the entire public. Mr. Janjuah a small example in our world, i think in this kind we have had,iod people not involved in Financial Markets have thoughts on things like qe and disinflation, where decade ago the average populace would not have been aware. You, so much. K the founder and ceo of playbuzz. Bob will stay with us. U. S. Government shutdown again . Congress is getting down to the wire. What has to happen to keep the light on. Keep it right here we are on the pulse. Francine welcome back to the pulse. Were live from london on bloomberg tv. Leaving hours to spare before a thential shutdown of American Government. Hans nichols is standing by. Will congress let the Government Shutdown . Hans heres what it looks like. They will have a twomonth extension. The senate needs to pass one procedural matter that needs to go to the house for a full passage. It is a clean continual resolution. Fighte will have a new carried the scariest part is john boehner, the speaker of the house, has announced his resignation and will not afterrd the bill december. Mitch mcconnell spoke about a big budget deal, the Senate Majority leader. It is unclear if we will get there. It will be a difficult fight in december. Do explain to our european viewers, and viewers around the world, the battle that will go on beneath the speaker of the house position . That is your public duty this morning. Please explain to francine what a whip is. Hans you know what a whip is. Then spacey wanted to be whip and he used that as a launching pad for the presidency. The joke is that being the Senate Majority is like herding cats. The old jordy leaders in the old majority leaders had real power. They also used real threats and real enforcement. The civics lesson is the Republican Party has a base number in the house of 4050. Ntatives they are conservatives, they do not want to lead, they want to shut things down, they do not want to govern. Is frustrated, democrats are frustrated, the white house is frustrated. The person that will be the most frustrated will be the next whip that has to get them into shape. They have proven they do not care about governing, they care more about ideology. Tom how will the Democratic Party respond to the love affair that republicans are going through . Hans on the congressional matter they will try to pick up a few seats and pick off vulnerable members. You have to think, when you look at how the districts are drawn within the state, republicans, if they are not close to having a permanent majority they have geographical advantages. In the inner cities you have minority concentration districts that are democrats. In thets are winning 70 innercity, but squeaking by in the suburbs. Whatdo we have to explain gerrymandering is . Can you imagine a Parliament District going from the london suburbs to dorset that is six miles wide . That is what we do in america. Francine there is a bit of me that is saying europe can look at the u. S. And say, with all of the lecturing about the fact we cannot get our act together as the eu on the refugee crisis, look at the u. S. , they have a bigger mess. It is not only european politicians looking at u. S. Politicians, how about the middle and working classes looking at their leaders thinking about what a bunch of idiots we put in power. Reflectshat that reduced Economic Activity and lower confidence. If you do not believe you are led by the right people in the right way, you get very selfish about the way that you save. You save more and spend less. You do not work as hard, perhaps. That is perhaps the abc of economics that we do not always think about. Mr. Janjuah people forget about that because we are possessed with the payroll and gdp numbers. In the conscience of the u. S. , you can tell me if im wrong, but you have a bunch of republicans who are wielding a big steak that are not going to give way, because they are still upset about obama care. Go with the rigidity that is out there at the hands of the white house. The rigidity is even not going to go away with mr. John boehner gone. Rancine that is a good point hans Nichols Nichols is our former white house correspondents. We will talk about the shutdown, and also bring it back to europe and the u. K. Inflation rates unexpectedly turned negative in september. To break it down for us, the bloomberg chief economic correspondent joins us. I think that if we break it down, the fact that inflation is going down, is that something that Central Banks do not have a power over . To some extent. They are struggling for power because they do not have the ammunition anymore. The acb will come under rusher for a quantitive easing program. There will be a question if that works and is translating into Economic Growth or asset market bubbles. The people we talked to said the ecb will do more. Tom the phrase that is going to wrong was coined by stephen england at citigroup is coldfusion, which has physics to it. What is in the toolbox for yellen, drug a, and carney. What do they have left to provide stimulus . Low, theyn keep rates can be in negative territory. The fed wants to do that according to the dot plot. Party scene that. There is a range of an instruments they can use. They would argue they are not out of ammunition. At the same time, they may have to increase the fiscal authority, maybe even unite to say you cut taxes and spending and we will back it up with bond buying. Mr. Janjuah that is part of the solution. I do not think the eurozone will launch a fiscal program, japan, ive heard the 30 billion equivalent is a drop in the ocean. The u. S. Is this side of a new president. I do not think you will get the appropriate fiscal action. It goes back to central bankers. The last conversation i had with a central banker was along the lines of we know that qe did not do what it was meant to do. Negative rates. We have examples of that already. Is that we are using the Quantum Mechanics analogy is that you can control the price of money but not the quantity. You could control the quantity of money or not the price. The uncertainty principle. Another way is looking at it another way of looking at is is you can print a lot but you cannot do a lot about money philosophy. Lone voice. Re a now andre warning you the idea of global recession. Have you seen in history a policy prescription allowing us to avoid sub 3 global gdp . Mr. Janjuah i think we are in an unprecedented area. This is the first Balance Sheet crisis in my career. It has been dragging on since 20072008. I think we will have to go through pain before we get to the sunny upside. The issue is when the next round of pain will hit the real economy, which i do not think can take a lot of pain, versus markets. Wealthked about the u. K. Being a record. I think that is embarrassing, same in the u. S. You have wealth levels at record quality at any record levels. In the world of modern media, the man and woman on the street know that and it makes them angry. That is why you get Bernie Sanders and Donald Trumps in the fray. Im not sure how we get through this without pain along the way. Francine that was very interesting. Bob janjuah from nomura and bloombergs simon kennedy. On the pulse we will count down to the u. S. Jobs report. And the single best chart. Stay with us on the pulse. We will tell you what to watch for the rest of the day. Francine welcome back to the pulse. On bloomberg tv, we are streaming on the ipad and bloomberg. Com. Tom, jobs, jobs, jobs. Tom we will touch on that today as we go to friday with the critical reports in the morning. What we have that should be the most watch and most listened worldwide is dave and rose it David Rosenberg. With inflation dynamics. He has an optimistic message for viewers and listeners alike. This is different from the David Rosenberg months and years ago. Forward are looking to an extended conversation. We will look at the media wars. You saw the Business Insider news on axl springer. Reviews in newd york city. We will speak about everything digital. As you know, everything is in our cell phones. We will talk to him about where we are with five years with this stuff. Francine everything is it what that means in terms of disruption for the older companies is fascinating. We are looking forward to that conversation on the pulse. We are live from new york and london. We will be talking about the markets. Pausing a little bit. We have lost 11 trillion over the past three months. That is mainly due to the china correction and commodities. What will the next three months bring . We will discuss that next. Announcer this is bloomberg surveillance. Tom commodities implode, and it will be good for america. In this hour, David Rosenberg america will prosper. Ofbegin three days coverage the American Labor economy. We are creating jobs for it and i trot out my single best chart for 2015. Good morning, everyone. This is bloomberg surveillance , live from our World Headquarters in new york. It is wednesday, september 30. Joining me, vonnie quinn. N london, Francine Lacqua we see more disinflation and deflation today with the european e. U. Inflation numbers. Francine we do, and that brings up questions about how much power Central Banks really have to fight this. Also, it is the end of the quarter. That means 11 trillion were wiped off Global Equity markets. What that brought home is how big the markets are, and that is possibly why janet yellen had to pause from hiking rates with deflation. Tom right now lets get the top headlis