That says that Fund Managers benchmark. Eight the how much of europe they have over the normal recommendation about 4 . Of that is the lowest exposure of europe in 15 months. Equity markets are opening lower. There is one story that finally has arrived and we have the numbers. It is the Foreign Exchange investigation which bloomberg started. It is a day of reconciliation in terms of the numbers. 3. 3 billion the u. K. , switzerland, and the united states. It could be up to 5 billion and globally, 40 billion. The markets are a little lower. Rbs saying how disappointed he was with the charge levied against rbs. They are fully protected and fully provisioned. Ubs up three quarters of one cent bumping the equity market trend. The whole rate litter can only charge them. The cftc and the fda. The americans and the swiss along with the u. K. , two quarters of a billion dollars. That is a considerably the lower the market had estimated so far. Ubs havingon and the to say measures. Hsbc, of course, also being involved in this. The ineffective control. That is what they said. The most within the fca numbers, that is beginning to hit on these particular equity prices. The u. K. Has been tough in its investigation. Rbs saying they are disappointed. Bucking the trend of up over 4 . Keep an eye on the minors. This is a big, big industry discussion. Where are we with hard landing in china . Where is the price of iron. Thehis city where they said price of iron will come under pressure again. If youre looking at a level of 101. Realdyne over one half of a percent which is when the biggest drops in a most two months. Thank you. We opened at 12. 13 points. That is how markets are opening up this morning in europe. The other big story this morning as the bank of englands Inflation Report. With inflation at a fiveyear low, we might as well call it the lowflation report. Investors are waiting for any clues on what we can get that first rate hike. Bloomberg newsis columnist and former pimco chief executive officer. We start with the inflation debate a little later. Im looking at a labor market puzzle that janet yellen share. If unemployment keeps going low, rage growth is over to be seen. What is the story for you . Two elements. What a cyclical and one is secular. Theres still for lack and until that slack is enough, we are not going to see wages go up which is a problem because we need to see wages go up as part of the lowflation,the mediocre. The second element district here. Is trickier. The question is can society adapt . That is a much longer issue and that when i be answered for a few years. The bank of england, you see low wage growth, low inflation. Banks like the bank of england that actually has a solid growth, are they getting lulled into a false sense of security when you are pulled off of a low wage hike because inflation is low . I would say yes but the problem for central bankers is that the unconventional policies they have had to pursue have led too bigger financial instability. When theyre looking with what to do with interest rates, they are not just looking at growth and inflation, but they have to keep an eye also on what does that mean for excessive risktaking because right now there is quite a wedge between Financial Assets and fundamentals. What is the bottom line for you . We are getting shortterm solutions and longterm problems down the road . Yes, i think Central Banks are buying a longer and longer journey for the economy to heal and for politicians to step up to their responsibilities. If it turns out that these things do not happen, we are going to find there is a risk that Central Banks become part of the problem. They are aware of this. At the symposium last friday, that issue was right there. They were complaining they were the only game in town and they were worried their intervention would cost them risks. We will talk about this more. I want to talk about the fx market. Inflation is happening in the Foreign Exchange market. When i see the dollar going higher and higher, i would ask the question to you, somebody that knows the Federal Reserve well, can they tolerate that for much longer . They will for a while but the question is will markets could tolerate it . The fed is taking its foot off the accelerator. The ecb will present harder. The bank of japans pedal to the metal. These policies are leading to major movements in currencies. That is the only shock absorber. My worry is that the volatility of the fx market will get translated into other markets and if that happens, and principal tenet of Economic Policy will increase volatility in order to encourage economic risktaking. That is a concern. Does that volatility go to other markets . We will talk about that after the break. Lets check in with some stocks. Rbs on theand receiving end some of some pretty hefty fines on the back of fx. Lets call it breaking some of the regulations. We will talk about that later. Hsbc down a third. Rbs up a third of a percent. Heres a picture of the general equity market. The daq down a touch. The bank of england inflation is the big one. We will talk about the bank of japan after the break. Welcome back. I am Jonathan Ferro live from london. You can go online, your phone, amazon tv and even apple tv. May postpone a plan salestax higke. Japanese equities have gone up suspending a sixyear high. Still with us is the chief Economic Advisor and Bloomberg News columnist. We will start with the bank of japan. I will come out with a load of numbers. The annual targets is ¥83. It will hit 70 of gdp next year. There 21 of national debt. Talk to me about the risks that has been accumulated. The risk is that this is not part of a comprehensive approach. In markets love it because the short term that is great. Lets understand that this was supposed to be part of comprehensive approach. The three arrows. We have not gotten that critical third arrow. The risk is they will get too much of the burden and at the end of the day, they find out they cannot deliver. Then japan is worse off. I look at some comments this morning saying it is vital to secure confidence in japans fiscal management. They say it not aimed at financing the government. I look at the comments from yesterday about raising rates and printing money to spur deficits. Ifsounds outrageous but japan is ever going to be able to pay back that debt . The answer is no. They would not be able to inflate their way out of it. The key issue is how do you act responsibly irresponsible . Everybody has this notion you have to act responsible. It is ready heart to reconcile. Japan is trying to do it and as a result it seems inconsistent because they are trying to reconcile two opposing things. You talk about volatility in the fx markets. Talk to me about the potential impacts. We have to understand that is what Central Banks are targeting. They cannot go after what really ails the economy. They have to go with competitiveness, the competition of the market, demographics. They are trying to buy time by weakening their currency. Now, when fx markets move, two things happen. First, temp companies hedge so you get exaggerated moves. In the past, tends to break things. In the old days, that is not the case today. The concern i have is you transmit volatility to other markets and we got a bit of a sense of this last month of how this feels, right . People are not ready for higher volatility. All old to sleep by the notion that the Central Banks are the best. Yields have got to go higher but then they went low, low. For a lot of people this was the rate of 2014. There was that day in october 16, he dropped like a stone, back up again. That was serious follow to the. Is that what is in store . What we saw yields go all the way down to 185. It is a reminder that there was not enough liquidity. If youre in highyield, bank loans remember that because even the treasury market is patchy when it comes to liquidity because there is not risk absorption. People have to understand that because the Liquidity Risk right now is really underpriced. I dont think the market is as much offside as it was in the beginning of the year. Itll be determined much more by economic developments than by everybody betting on a reversion to the mean. You are talking about a lack of liquidity in the treasury market. Everybody is buy, buy. 2. 5 on italy. Questioning the economic fundamentals and the credits of those particular countries the widow this is maker the same way japan has been or a shock down the road . My concern is that everybody right now, especially, understandably so because we are in a system where Central Banks are committed to the interest rate. We have been ordered over and over again by saying the Central Banks are the best practice. We have taken every single risk factor. You can talk about spreads. You can talk about liquidity. You talk about the equity payment. If you look at every risk spread, it has been compressed. Of that assumption moves as it , the taper tantrum as it did in january and september and october, you will see outsiders move and people are going to be reminded of liquidity is not what they think it is. We have to talk about highyield. Lets keep it simple. That it is a decoupling of valuations of financials. You have to believe that fundamentals are going to validate these prices. I think that is a major concern. I think a lot of people are starting to say at these levels, let me take a bit of money off the table and let me have the option to come back in with something that is more reasonable. You talk about markets and fundamentals. Lets talk about the s p 500. Im looking at earnings. 95 going into buyback of dividends this year. Is that what this market is . Basically, it is companies that have accumulated a lot of cash. There is tremendous pressure to put it back to give it back to shareholders. We have seen three stages one was accumulation. Two was share buybacks and high dividends. Now, we are seeing more. We are going to see an mna numb er that is at or above 2007. The problem if you are main street is these are expensive in nature. They are not really resulting in higher investment, more hiring. That is the critical stage. That is a longterm economic fundamentals. B are saying the bull market will continue because recession is tightening. Do we need one of those two things . If we get either of these things, especially if we get a recession and that recession can come because of political shock, the bull market will have a wakeup call. There is more of a fundamental issue. Everybody is confident that you can stay in that trade until their unambiguous signs of a turn. The problem with that approach is that there is a fallacy of competition. The danger is technical. Everybody is on the same side waiting for the big turn and waiting for unambiguous evidence of the big turn. It will be pretty small. We will come back after the break and talk about the policy report. Improving my, is is it approaching stagnation or is it already there . Heres a picture of the markets for you. Down by six points. The dax is down by 4 10 of 1 . Join me after the break. We are back in two minutes. Welcome back. I am Jonathan Ferro. Time to bring you up to speed. Regulators in the u. S. , u. K. And switzerland ordered five banks to pay about 3. 3 billion because of a federal Exchange Manipulation program. Ubs will pay the most. Followed by citigroup. Jpmorgan, rbs were also find. Britains Financial Conduct Authority is expected to discuss these estimates at the News Conference at the top of the next hour. Profits will be lower in the second half than in the first. 160u. K. Grocer will invest Million Pounds to reduce prices which would also likely lead to a final dividend. They anticipate years of negative sales growth as shoppers continue to look for convenience and better prices. Ferrari ipl was inspected to happen between the second and Third Quarter of 2015, according to the chrysler automotives. S. He is spinning off the luxury carmaker to upgrade capital. He hopes the floats will raise. I think anything i tell you about value today is going to be wrong. I have had plenty of conversations with most of the bankers who are talking to us about this. One thing i know for sure is we are going to get it wrong. The best thing to do is just wait until we go public and we will talk about value. Lets turn now to geopolitics because the sanctions are taking their toll in russia. Rushing growth has hit its lowest pay since 2009. Punitive measures from the west and low oil prices have brought rushing growth to 0. 3 . The former back pimco ceo. Very simple question, complex answer probably. How close are we to a financial crisis in russia . Ofif it is a combination stagnation, Credit Ratings coming down and enormous pressure on the balance of payments, if you go one step further and want to parallel to 2008 1998 when you had defaults, we are not anywhere there. This is a country with over 400 billion of reserves. There is a cushion but they are facing stagflation, tremendous payment problems. It is not just the sanctions, it is also oil prices. Were you surprised by the collapse in oil prices you have seen . I am surprised with what cap will so high given the global demand. I think this is an adjustment, but what also surprises me is the different messages you are getting from the commodities markets and the equity markets. The commodities markets is flashing yellow, near red in terms of global demand. It is really global demand. The equity market is flashing green. You have to reconcile these two markets. We have seen an increase in the concentrations of Energy Companies issuing bonds. Big worry . I think if you are an acid a investor, it is a big story. Emerging markets were reminded in 1998 and 1999. Be careful of how the index propose because the index rewards the weeks company. Weakest company. It is important to be a smart passive aggressor. This is going to be a reminder of be careful of passive investing where credit risk is really high. We will wrap this up. I will say word and you can shoot back a line at me. Putin. Disruptive. Austerity. Excessive. Mario draghi. Bold and courageous. Angela merkel. Reconciler. Janet yellen. Critical in the importance sense. Pimco. Full of incredible talent. Bill gross. Brilliant investor. Enjoying his time with his daughter. Treasuries in 2015. Barbelled. Great pleasure to see you. Former pimco ceo. Thank you for joining us. Lets take a look at how the banks are ordered to pay fines. More on that story after the break. Ubs up half of 1 . Hsbc also lower. Lets talk about the news after the break. Heres a picture of the general equity markets. It opened a touch lower with about 2 10 of 1 . The dax is down by 7 10 of a percent. You can follow me on twitter. Muhamed is on there as well. I will be back in two minutes. Welcome back to on the move. I am Jonathan Ferro. 30 minutes until trading day. Heres a picture of the markets for you. Down by a third of 1 . The dax down by 9 10 of 1 . 82 points lower. Lets go to Caroline Hyde. I am going with the green this morning. Three regulators, five banks, 3. 3 billion. That is what is being settled in the Foreign Exchange probe at the moment. Ubs rising on the back of it. They provisioned more than they have been asked for. Million andr 800 the provisions 1. 8 billion appeared o. Many analysts are saying this is a relief and they have plenty of cash if there were any litigation problems going forward. We are talking about settlements. Lets talk about offshore. The biggest gain on the stocks up by 17 . This is a Floating Oil Production platform maker. Overall what it is trying to do is settle a case with the dutch prosecutors. 240 were being fined Million Dollars a last improper payments by sales agents being made in africa and south america. Improper practice but it seems to be a relief. They are up 17 . Meanwhile, lets talk italy and broadcasting. Currently up almost 7 for mediaset. The former Prime Minister owns the companies and losses narrowed. The reported thirdquarter sales to be stagnant. Now much improvement in the Italian Economy but overall we are still seeing reduction in costs and that is helping protect the losses little bit. Mediaset, the second biggest gain in europe. Thank you. The three big movers. Here are bloombergs top stories. Japanese extended a six year high on the speculation the Prime Minister would delay a salestax increase and call for election. He is likely to call a general election on december 14. Signal he isith considering postponing a sales tax increase to 10 next october. Governor mark carneys first 500 they an office in the bank of england. He will produce in the quarterly Inflation Report. It will likely thwart Market Expectations and to remain on hold. Comments from several policymakers in recent weeks suggest we will hear a significantly tone. Regulators in the u. S. , u. K. And banksrland fined five 3. 3 billion to settle a probe. Ubs will pay the most. Hsbc were jpmorgan, also fined. Will be discussed at a News Conference of the top of the next hour. The bank of englands martin says the currency traders work sharing information about client orders. For more on the fx we are joined by liam. He led the Bloomberg Team that broke the story last year. Lets sing her own praises. This was on the back of a story led by you. Of this is correct. In june of last year, myself and a couple of colleagues wrote a story that highlighted this benchmark was used in the forex change market and is usually relevant for the valley of Peoples Pensions around the world. It was being potentially gai