Transcripts For BLOOMBERG The Pulse 20150902

Welcome to the pulse live in london. Im manus cranny. We have had a tough ride in equity markets. For stocks. Chinas benchmark index closed flat on the day. It wasnt a day that was not without its drama. The shanghai dropping by 5 . And that then turned around, flipped around. We went into a gain of. 9 , before he came back to the close of trade. Of course, this is the last trading day before Mainland China goes ahead with a world war ii parade. And those take place tomorrow, as china prepares to flex its military might. The government has been flexing its muscles in the markets. For more lets bring in richard frost. Great to have you with me this morning. Back just ated it the close of business. This is the most, i suppose, contrived market for many years. Richard yeah. Become incredibly predictable, but it is also a ts bolder every single day. Fell almost 5 shortly after it opened. And during the day, it started to come in, but it is in that thishour, where we see concentrated buying over the Largest Companies in china. The biggest bank gaining by the 10 daily limit. Buying, taking the largest weightings. What they are causing to do is not make the market look as bad as it is before they have this grand military spectacle which is aimed at showcasing chinas military might. It is a six day in a row we have seen this buying come in towards the end of trading. What we have also seen is that this has been matched by retail investors. They seem to be selling to those state funds. It is hard to know how much longer they can do this. One thing i can tell you is for journalist and traders alike, there is some relief that the market will be closed until monday. Manus were grateful for small mercies. Couple daysy without having to write about the daily machinations of the chinese equity markets. Australias economy it expanded last quarter at only half the pace that was forecast. 02 igures show a major growth. This is a reality check. The reality of china slowing down. I think that is exports at 3. 3 , that attracted. 7 Percentage Points from growth. The only good news stories under the figures was followed till Government Spending was vola tile Government Spending. Exports weaker and also investments not firing as the central bank of the government wouldve hoped. Investment was down 7 in the Second Quarter from a year earlier. So disappointing numbers and the quality of growth also not particularly good. The issue is this china is australias biggest trading partner by a country mile. So, the question is this weve seen the currency move, seen the currency drop. What will australia do next . Are they going to get into this rate restructured rate reduction cycle again . What happens next for australia . Weaker currency did drop to a new sixyear low after those gdp numbers today, below 70 u. S. Cents. Rbia is going to be pretty happy the rba is going to be pretty happy about that. Australia wants to boost services exports. It wants to try to drive growth by producing what the growing middle class in asia would like. It does not happen overnight. Long way to go a in this unwinding of the Mining Investment boon that has happened in a strong. Economists say where only 40 through the decline in Mining Investment so far. There is still some way to go. So, what economists are saying is growth and estoril you will growth inow trend australia will remain below trend for the next 12 months. Puttinghank you for some context around the australian numbers which brings us nicely to our twitter question. We have opened up the church doors. Are equities in a oneway offrection a one correction, or is there something bigger at play . Francine is out of the office today on assignment. So, its just myself for the moment. Are equities in a oneoff correction or is there something bigger at play . The head of Global Equities at fidelity. They manage 239 million billion pounds. Are you a deep skeptic . Concern there is something more systemic at play . Some systemic issues in china which some of you alluded to. In the developed world, in the thingsurope and japan, look pretty good for equities. Cash flows are high. That is the first thing. And the second thing is we continue to be in this ultra low Interest Rates, easy Monetary Policy setting. There does not seem to be any change to that on the horizon. And that should be a good backdrop for developed market equities. Manus am i able to extrapolate the fed is not going to move . Richard this angst about the fed is just ridiculous. The amount of verbiage coming this onee fed about tiny little move is extraordinary, and it shows the extent to which a lot of the Central Banks have gotten themselves in such a pickle. They have become so politicized and so dependent, so reactive to markets that it is ridiculous. We are talking about the 25 basis point rise. It is absolutely nothing. I think it should, if it comes the markets may not react to well, but frankly if Interest Rates are zero or 25 basis points, i do not think it makes a difference. Manus if its verbiage and by the way, i am not allowed opinion. Im delighted when somebody uses a strong word. If it is verbiage, why are we so obsessed in equity markets . We have livd on z lived on zero percent rate. That says to me you say the cash flows are strong. But theres not exactly pumping on growth. My question is those valuations, can they sustain in developed markets . Richard you are right. Financial markets have learned to live by the fed and other Central Banks because it is these extraordinary monetary policies which have driven financial asset price inflation. The question is will quarter of a percent or half a percent base rate stop the party . It might. Weve never had q. E. Of this eff ect. Bear in mind, not reverse q. E. Stop q. E. There is an element of uncertainty. That is why the markets are so jittery. I suppose we have to get through before we can yes, corporate are fine. By the way, where only discounting future cash flows by a quarter of 1 . Manus we will get into your strategy. But ive got to ask you. Its like throwing mud at a wa ll. Rate cut, liquidity cut, ipo cut. You know what . Lets not depreciate. The fx reserves are dropping. Please help me with this. Skeptical or is this a desperate reaction . The chinesehink monetary policies have gotten themselves into a bit of a pickle. Got classic retail mania and bust. They do mania and bust pretty well. They are uniform and behavior. In behavior. We have seen an effort at sort of financial crowd control by the central bank and they have failed. Im not surprised. Financial crowd control is very difficult. The only successful financial crowd control we have seen in three years as one central bankers said we will do as much as it takes to use a quote or unlimited q. E. That is the only thing which can control financial crowds. Manus very briefly before and move on, politically, do you think the leadership in china is under pressure . Richard oh, yes. Im sure there are questions internally of the leadership. Obviously there are factions within the party and some of those sections will not be happy about the turn of events. There is pressure. I think that is the coming true in some of the policy moves you here monetaryto w authorities are trying to stabilize conditions that have contributed to. Manus we will get into your strategy. You will stay with me. Richard lewis from fidelity world why investment. World wide investment. Most opec would like to see crude at 70 a barrel. According to irans oil minister. He confirmed iran desire to boost output. We have plans to increase our production immediately after the lifting of sanctions. And after four months we have another 100rease by Million Barrels. Manus Vladimir Putin is in beijing today. President and also reported to be traveling to china for the celebrations. Tesco is said to be nearing an agreement to sell its south 6. Billion. For they won exclusive rights to negotiate with tesco and secure financing for the purchase. South korea is tescos Largest Overseas market. With more than 6 million customers in any given week. Still to come on the pulse, germany is not seeing too much of an impact from china, according to the german deputy finance minister. We will hear his opinions. Plus, an exclusive with iran oil minister. He says the country will boost production by 1 Million Barrels a day. Later, tesco is up for sale in south korea. We will have more. We take it serious since germany as one of the biggest exporters. Our car industry has a big market in china but we are not panicking. Manus dont panic. Welcome back to the pulse. That was germanys deputy finance minister speaking to hans nichols. Were back with richard lewis, the head of Global Equities fidelity worldwide investments. The germans are not panicking and this takes me back. To where we started. You are happy with the profitability. How does germany and europe fit into the fidelity perspective . Richard there certainly is a bull case for your, for eur ope, because Interest Rates are low and valuations look reasonable for the market as a whole. For an end by metlife, which has clearly benefited and normal is germany, which is clearly benefited in normatively. Mix bute is in the there are other territories i would go to first. And principal among those is japan, which i think is still a favorite area. Manus you do mention before we get here reasoning on japan valuations in europe are below america by 15 . Does america trump europe to you . Richard yes. Its always a mistake to compare headline valuations in europe with headline valuations in america. As an Equity Investor in america, you have certain rights. The whole system works for you. As an Equity Investor in europe, you have lesser rights. You are comparing apples and pears. Manus absolutely correct. Why are you such a bull on japan . That is unfair. You are a heck of a bull on japan. Zero percent rate, structural reform and a crumbling currency. we will come back to the currency, but the story in japan is one of corporate improvement. This is a big change it is one of these consensual changes in an Asian Society whereby its now excepted the japanese corporates need to make higher returns on their capital. Thats sponsored by nikkei themselves who made up this nikkei 400 index. Now, that is changing corporate behavior. From an equity or capital provide a point of view for the better because it is raising profitability. So, thats the underlying corporate story. The financial conditions are as positive as they could possibly be. When you have got zero Interest Rates, you have 60 or 70 billion a month being pumped in. Dont forget that. And you have got official, an official push towards equities allocations in state funds. The financial conditions are is expensive as they can be. Manus we have got this new story that Japanese Post Bank its a new well. Uasis another qau institutional whale. You have also outlined a couple of individual names, and google is one of those. Do you like it has been reclassified . Do you like the silo . Global google is a mammoth. Google is one of these companies which has established global dominance in these unregulated bull, uncontrollable. Manus not for the europeans. Richard i do not think they will get terribly far with trying to regulate google. As much ias sucking profit out f all sorts of other pools, profits in the economy. That is a great long time story. These intellectually property related globally dominant companies are the leaders of this bull run, and they continue to be. If there is to be another leg, i think leadership will continue with these intellectualproperty stories. Point, if posture the we have another good old bull run. Have not had a cathartic moment . Is it not a good thing to have a correction . The dow, the nasdaq, the s p. We are all invested. Richard yes, we are. People call it a healthy correction until they in it. Manus vicariously, everyone is it. My pension is in it. Everybody in this building has money and attention in the city of london. So, if im going to get constrained by the daily machinations, i would not invest at all. Richard you are right. The markets should go up and down. They should not go up in a Straight Line as they have been doing. The stability of the last 18 months, the consistency of the pattern of the last 18 months is ofrecedented and a sign intervention. Markets go up and down. You should ignore the shortterm gyrations and say, are these company earning good money . Manus to close very quickly because the producer will be stressed, there is more volatility to come. Richard once volatility sets in, it will take a while for this volatility to subside. Manus we lock in for a bumpy ride. Back in two. Manus welcome back to the pulse live on bloomberg television, radio, and streaming on your tablet, phone, and bloomberg. Com. In one of the biggest changes in its history, google has changed its logo. Why . Here is a later that knows the answer. It is caroline hyde. Im getting told in my ear what sans serif means. Caroline simpler. Google is trying to get simpler. It is trying to make itself more relevant across not only is key, Search Engine and keep the branding aligned throughout its different products. Its interesting. 1999 is when they first went for those four colors. They stay. Its the lettering the harris c that has changed. Sans serif typeface. You can shrink it more easily. This is applicable to your smaller screens. Manus even google has to change for mobile. Caroline it has to. And lower bandwidth. Perhapssier to use than you are getting on the internet in india or chinawher where broadband as not quite as quick. Netflix going live in japan. Softbank, using companies to market themselves, to be able to convert 30 of all japanese households to subscribe to pay tv. U. S. Is 85 . These are low hanging fruits. They are not used to paying for content. They market and be able to get netflix on their phone . Panasonic and sony are going to put it on their tv remote control. Manus huge opportunity for netflix. Up next on the pulse, an exclusive. Oil minister. What did he tell bloomberg . Back to thee pulse, live in london. Lets get you up to speed. Chinas benchmark stock index has fallen on the last trading day of this week as investors gauge the level of support for a Major Military parade on thursday. Shanghai composite is extending its biggest two month loss since 2008. ustralias economy grew by 0. 2 last quarter. Down from thew first few months when gdp expanded by. 9 . A slow down in exports to china weighed on estrellas economy. With government and Household Spending helping to keep the number above zero. Oil has continued to slide. Wti brent below 50 and below 45. The u. S. Government report later today is likely to show that stockpiles rose by 900,000 last week. The worlds biggest independent oil trader says crude will remain at 40 to 60 in the next year. The newly appointed german deputy finance minister. Hes seen as a rising star in Angela Merkels cdu party. Hans nichols sat down with him to get his view on china, greece , and the refugee crisis engulfing europe. We take it serious since germany is one of the biggest exporting economies in europe. So far, we do not see too much of an impact. Domestic demand is growing when it comes to rising salaries and pensions. So far, we are doing very well but we take it serious. Hans when you say we do not see an impact is that in the second or Third Quarter . A lot of this happened in the last week. There would be a lag time. Ahn we have a very low Interest Rate. We still have a lot of pro argument for growth and we will see what comes out of it at the end of the year. Hans another thing we need to factor in is all the uncertainty in greece. How concerned are you that there is not going to be a review by october, and because the elections, the review could be delayed to november . N the end of october it is two days later, that is not the problem. Do need to have a review before there is a next tranche to give more money to greece. We do expect to ever comes w ho ever comes into power that this agreement is an agreement with the greek state, not one single party. Hans so, you are not at all concerned about uncertainty coming out of the election . Course. N of there is a chance that after elections we have a reform government that has a mandate for reforms as well in greece and that could make things easier. Hans mandate reform and you find a political center. That could make implementing these measures which are difficult mr. Spahn most of the measures are already implemented. The Greek Parliament voted in favor before we decided on the esm support for greece. The most has already been done, but i do think as after three weeks of close banks in greece, everyone understands there have to be reforms if greece was to stay in the eurozone. Spahn speaks to bloomberg throughout the rest of this show on the pulse. So, hans nichols had a chat. Hans, you join me now. Great interview. I love the way when he reacted about china, which was dont panic. There is a wonderful sitdom. This country. Germans are not blinking. Hans well, they are concerned but not panic. I think most of that focus is in auto industrye figure look in a country that is so export dependent. They see turmoil in china and they do not see all that solid growth in south america. North america is still strong. They are banking on that. In terms of the greek uncertainty, he did suggest there were concerned about that. The most interesting thing is that he held up the idea that the review could maybe potentially, possibly be in november. You have done dozens of interviews and by dozens i mean hundreds, and afterwards you autopsy yourself and what you could have done differently. I wish i would have pressed him harder that it is possible they are counting on the review for greece to place in november and not october. He can close to saying that. I should have pressed him. Mea culpa. Manus oh, hans. I suffer from that disease a great deal. That, apart from anything else stand out to you in the conversation . Give me a feel of what is going on on the ground. Hans yeah. I m ean, so i mean, the day is just sort of started. We heard from the outgoing ceo of deutsche bank. Everyone is looking at the new regulators, the new Capital Requirements, and they are concerned. They want to get clarity. They are sort of using this forum to figure out clarity. The other important thing we learn is on the refugee crisis. The finest ministry is figuring out and they said billions. How may more billions they are going to need to spend when they talk about what they are going to do for the refugees, and the effect it will have on the finances of the german state. So, i think there is a lot going on in germany now, not just internationally but domestically in terms of this refugee crisis and how the finance ministry is going to recalculate andriy figure all their outlays. I think that is an important question. Because Angela Merkels government has indicated they want to build schools, have language courses, build housing. They want to make sure the refugees, those from countries that are wartorn, no economict migrants, but refugees find a welcome home in germany. It is going to be a difficult task, even after you set your goals to it. Getting there will be difficult. Manus as you say, this is now getting into a Major Political issue around europe. It is never far from our conversations. Hans a difficult issue for just as government, not messick with. Dealing with a lot of ugliness that is happened in germany. There have been 200 ours is. In brussels, there needs to be for this situation to be viable, for the visa system to work, to have Free Movement of peoples, you need to have a Distribution System for the refugees, and you need to have agreement in brussels that figures out an adequate, fair and just way to resettle refugees throughout not allso they do end up in one country and other countries exclude them. Manus you just used in a pertinent word like agreement. Oil never far from the agenda, either as it dips back below 45 a barrel. That has not delayed iran to boost output. Elliott gotkine has more. Bloomberg spoke exclusively to the Iranian Oil Minister p how much oil was the hoping to add to the market . Million an extra barrels a day. They want to pump out as much oil as they can. They want to get their market share back that they feel was pulled underneath them by these crippling economic sanchez. As soon as these crippling economic sanctions. They want to grab market share back as quickly as possible. To increase our production immediately after lifting the sanctions, half a Million Barrels a day. After four months or five months, we have plan to increase it another half a Million Barrels. A million plus half a million is o ne Million Barrels. Is 30 Million Barrels a day. They are pumping more than that now. Any Additional Oil added onto a supply good has the potential t a supply glut has the potential to push prices down further. Manus you describe it as caps off in r as whip saw in reform. All of this on speculation that opec woul coordinated a cut. What did he say about that . Isiott he said, look, opec happy to discuss what is going on in the market with nonmembers of the cartel but opec will not be dictated to or wait for others to make their decisions. Opec will do what is in opecs best interest. In a country that hopes to pump out more oil, it feels the onus should be on other countries to support prices, rather than iran. That said, the minister reckons a fair price for oil abarrel,70 to 80 but we are far away from that right now. Manus good job there. Thank you very much. Lets check in quickly in terms of the price of oil. We are joined now by the bank of Americamerrill Lynch strategist. Speaking of crude, there you go. We are down another 2 . Tell me this. Of course, everybody likes 70 oil. They are not going to get it, are they . Sabine it will be very difficult for us to get there. The market is oversupplied. The oversupply will continue until the middle of next year at least. The situation in china is only making things worse. It is having repercussions across other emerging markets. On top of that, as we heard, we are getting more iranian crude. We do not believe these claims. At the most they can add half a Million Barrels a day in six months. But that is a lot of oil coming into the markets. And lastly, lets not forget the dollar keeps on rising. It isnt rising against the euro or yen, it is now rising against major currencies. That will have a dampening effect on all dollardenominated Commodity Prices including crude oil. For the moment it looks difficult for crude oil to turn around. There are a lot of negative sectors in the market. In particular, we are concerned about global growth, and looking at the outlook for immersion markets. Emerging markets. Manus you have cut your targets. That is a bearish landscape. There was nothing in what you just said tome that takes me up and over 50. Sabine look, we do actually think the market is forgetting that towards year end there are some reasons to suggest that prices can rebound a bit. Prices have, asset not collapsed that much on top of the price decline we have seen early this year. Lets not forget that shale out put will decline in the u. S. Crudecurde output output in the u. S. Will decline by one Million Barrels a year. Next year we are expecting nonopec Oil Production decline. Inus on that again, understand your mistrust of what you been told by iran. I get that. I understand that, but he goes on to say that for some months, the Iranian Oil Minister, we missed an exit of rigs from shale gas. Not all of them are returning to their level of shale production. Is he selling his own goods, versus what you are saying . Sabine weve seen a 60 decline in the u. S. Capex is down dramatically. U. S. It isps in the down 10 million 10 billion. Granted costs are down. This capex decline will have production. That will lead to a gradual slow, but an improvement. In the oil market in private the other sector i want to highlight year end. Lets not forget we will get more european stimulus. We will get chinese stimulus. It is hard to imagine they are not going to respond. We get further Interest Rate cuts. Finally, yearend, you get one Million Barrels a day increase in demand. That should also provide support to oil prices. Our forecast for next to is 55 a barrel for brent. 53 for wti. Equally, i would point out if prices were to decline further in the shortterm, the incentive for opec to cut will increase exponentially. Manus . And that is the great conundrum what is their capitulation point . Some people say the market has capitulated. What in your mind is the point . Opec is broad church. We probably only care about sabine when we look at budget break evens across all opec countries, including saudi, 85 plus. That is just the fiscal breakevens. There, saudi starts to suffer below 55 a barrel. 55, they can run down the reverse at a reasonable pace and issue debt into open markets, which is what they have been doing. Below 60, that will start to be very difficult for them. We do think saudi has an incentive to try to keep prices above 50 a barrel. They may, as prices drop further, implement a quiet or a loud cut. Certainly, as prices drop below 40, you would see an incentive for opec to come to the table and perhaps coordinate a cut with other nonopec members. Manus there is a lovely phrase and our story this morning. I would be interested to see whether they are loud or quiet. Usually they make it clear what they want. Its just that everybody else there are bigger holes in the siv. Citi and goldman used a wonderful phrase. Talking about a near parabolic curve over oil prices. My question to you has the market seen the best moment ahead in 2015 . What do you make of this germanic price action . Price action . Ic speculators on both sides. In terms of a fair percentage of participation . A very the hedging is important part in the markets. What weve seen our liquiditys have dried up. There is a big mexican hedge going to the markets that has created negative which is explaining why we are seeing sharp price moves. If they are hedging, the way they are doing it leaves banks with a negative position and that is accelerating the decline in prices. More importantly, i do think produces in the u. S. Havent hedged. They are very under hedged. They are starting to panic a bit. I do think some asset prices recover a little bit, they come into the market and sell, which will curb any upside to prices. There is some upside year and, but not a huge amount. For wti to reach some of the levels you mentioned before, you have to dream. [laughter] manus everybody entitled to dream. That was a great insight on the recent oil market moves. And the future for 2015. From bank of America Merrill lynch. Coming up, we will talk u. K. Retail. Some major moves today, including 6 billion in tesco. It looks like it is about to sell it south korean business. Well break it down after break. Manus welcome back to the bloombergsfrom European Headquarters in london. The u. K. Retail industry. A billion dollars deal for tesco. Lets bring in bloomberg intelligent analyst charles allen. South korea, i think there is a line and the story on bloomberg that refers to this being the crown jewel. Was it the crown jewel . Charles i think it was the biggest and most profitable. But conditions in the south korean market have changed quite a lot. So, it became inevitable that they have to sell it. Its worth a lot of money, as you said. So it actually makes an impact on their overall debt which is maybe 12 billion pounds. We actually will see some Material Change in that. And secondly, maybe they have to south korea if they are going to keep the value of that business. Manus a lot of this was driven by debt, the need to address their debt. Lewis, this isve a smart move by him . There are number of assets they are looking at, and this is the first prize they have put out there. Charles yeah. We will see him much they get and see where the metrics move. But i mean, the point is is that their capex constrained and south korea was going to need a lot of spending money. To invest in the Convenience Store business or invest more online in korea. They could not afford to do it. Manus give me a sense of who is winning the war . We know the classic discussion, which is snapping at the heels of all players. Tell me about the convenience markets. The convenience market in the u. K. Continues to grow. It grows for all the u. K. People. It is a global phenomenon. In south korea, weve seen the convenience share through 12 to 16 now. Tesco surprisingly has missed that boat. It has got nearly 1000 stores, but there are 24,000 Convenience Stores owned by the three major operators there. Manus they gives you a sense of what else they have got to do. Thank you very much for giving us the update. Break, want to check in on these European Equity markets. Lets have a look. Of course, what we have seen is a continuation, stoxx 600 down by. 2 a 8. Ng b down by it is only the dax which is flat. Stay with the pulse. Manus welcome back to the bloomberg television, streaming on your tablet, and phone and bloomberg. Com. Your viewers, there is a second hour. Francine is on location today. We have more from the frankford banking conference. We speak to the anus champion china woes. Why australias economy slowed. And oil retreats below 45 a barrel. Irans oil minister said the nation will boost output by a Million Barrels a day. Nick robinson steps down from asos. Tocks drop 5 on the news. Good morning to our viewers in europe and africa. Good evening to those in asia and a warm welcome if youre just waking up in the United States of america. Im manus cranny. This is the pulse. European stocks trading a little bit lower. If youre just waking up, china closed down. T was a relatively flat close. Re is mark with i suppose an upsum of volatility. Mark chinese stocks sinking as much as 4. 7 on the day. Today read what has happened in the last five days. Get in here. Have a look at the shanghai composite over the past five days. Each day it start lower and rose at the end of the day. Monday started lower and rose at the end of the day. Yesterday too, today. Buying equities ahead of tomorrows big Major Military parade after the two biggest monthly falls since 2008. If youre a chinese trader, you now have a 113hour rest before markets open again on monday. Markets are closed tomorrow and on thursday. No volatility tomorrow. Markets are closed. Currency markets also very volatile. This time yesterday i was telling you how the haven in the currency markets was the japanese yen. It wasing against every single major currency in the world. Oday there is a bit of an tied tite for risks. These are the big 16. The green are all the currencies that are rising against the yen today. The canadian dollar. The mexican peso. Norwegian kronor. The only currency the yen is rising against, the swiss franc, the taiwanese dollar, he south korean won. Focusing on countrys with surpluses such as japan and the eurozone and denmark and sweden and switzerland as well. Very quickly, we want to focus on the stoxx 600. There you go. Opened higher. Lower now. The focus turns to tomorrows e. C. B. Meeting. Hursdays big, big, big u. S. Jobs report and just before i get shot in the head by my producer the aussie dollar falling for the First Time Since 2009 after weaker than expected dpped data. Manus. Will the r. B. A. Raise rates in november . 50 50. Thats what traders are telling us. Manus only you could tell the world there are 113 hours to sleep in china without volatility. Ets switch now to the leaders of of the top banks. The event which lasts for about two day also focus on changes within the Banking Industry. Hans nichols is on the ground for us. Who have you been talking to . Hans well, we have been trying to talk to as many bankers as possible. We spoke to the deputy finance minister and he gave us his overview of whats happening not just with the german banking situation and greece but also concerns about china. It is dominating some sideline conversations here. Here is what he had to say about the china slowdown. Well, we take it serious since germany is one of the biggest exporters in the world. There is a big market in china but we are not panicking. So far we dont see too much of an impact the domestic demand is growing. So far we are doing very well hans there e it would be a lag time in the data. Of course there will be. We will see that. We have a very low Interest Rates. We still have a lot of pro arguments for growth as well and we will see what comes out of it at the end of the year. Hans another thing we need to factor in, what happened in greece. It wasnt reflected in last quarters g. D. P. How concerned are you there is not going to be a review by october . The review could be delayed until november . Well, we do expect in h the review, the latest is the end of october. Two days later, that is not a problem. We need to have a review before there is a next tranche to give more money to greece. We do expect whoever comes into power in greece after the election that this agreement is an agreement with greece. Not with one single party. Whoever wins must do what is promised. Hans youre not at all concerned about uncertainty coming out of the election . Of course. But on the other hand there is a chance after these elections, we do have the reform government that have the mandate for reforms as well in greece and that could make things easier. Hans you think mandate reform. You find a center the gravity is the center. It is difficult. Most of the measures are implemented. It is very important to see it. Greek parliament did it in favor actually before we decided on the support for greece. Most has already been done but i do think after three weeks of closed banks in greece, everyone has understood that there had to be reforms if greece wants to stay in the eurozone. Hans i heard a note of optimism there, confidence that the German Economy can weather the storms in china and there is going to be a positive outcome coming out of the elections in greece. The negativity here is concern about what the Banking Industry does in transition. How do they deal with the Digital Economy . How do they deal with upstart rivals that deal with lending . Well be speaking with the founder of lending ko later in the morning. You see so many porsches and b. M. W. s. Money courses through through this city. Youd be such a celebrity if if you were here. It would be hard for you to on the move around. Thats why youre stuck behind the desk in london. Manus hans, some of us get all they . D gigs dont is hans nichols a celebrity in frankfurt . Maybe you want me to treat me about are equities still in play . How worried ow . Im manus cranny. Francine lacqua is on assignment today. She will be back in the office tomorrow. Lets get an economist perspective on how worried we should be. A chief economist. How are you . Im quite concerned about the volatility in the markets and what effect that might have on growth. There has been some talk on growth. We dont think world growth is going to be 2 this year or next year. We think probably close to 3 , 3. 5 , perhaps even a little more than that next year. We are seeing a marked patent in terms of the various world economies with merging markets having a very tough time. However most developed markets are doing ok, if not pretty ell. Commodity producing commodities you mentioned earlier in the show such as industrial and canada. Manus look at u. S. Factory output. The lowest since 2013. That worries me. Canada, they are technically in a investigation. There is not much distance between aussie growth and flat line. Christine lagarde is warning are we just hopeful and leaving in a zero percent world and once we get liftoff from the fed, our hope dissipates. My guest from fidelity pointed out there was so much verbiage about raising rates. These are not numbers that in australia we know about the absence of investment in certain areas of resources for quite sometime. The aussie dollar has been overvalued for a long while. It has taken a number of years to get back toward something you could call fundamental fair value. If were looking towards the prospects of the u. S. Rate rise, you have to remember the idea of tightening monetary policies, the u. S. Economy has well. Well economic growth, unemployment has come down. It is amongst a select group of economies in the world. I think that is the issue. Manus will the 113 hours of no volatility, mark barton said the Chinese Markets are closed for 113 hours. Will the chinese have to do something much more substantial with Monetary Policy and doing it a fiscal response from the chinese . One of the issues highlighted early on is that the Chinese Market is only where it is at the moment because of wide scale support and big chinese effectively fake buying. Are we going to get the same intervention on that scale post the victory day holidays . I think the risk is that we dont. There has to be a different response, not to support the markets but concentrate it on attempting to stop the economy from slowing down too rapidly. We had a reduction in Interest Rates and reserve requirements last week. We may not be that far away from another one and perhaps fiscal support as well. I think the way we would look at it is that chinese authorities cant manage markets beyond the short term. Manus just before we go very briefly. Quitting janne support by 2015. They want to conserve reserves. Im shocked by that. I think that is quite staggering. The chinese having to consider preserving reserves . They have considerable Foreign Exchange reserves as we know. Support of the janne suggests it. Of the yuan supports it. There is probably an alternative agenda there. Chinese authorities dont want to r. N. Fwombings fall too quickly. They would be upset if it was weaker. Manus youre going to stay with me. We have more to get through this morning. The chief economist invest ech. Irans oil minister spoke to bloomberg and said they will boost output as soon as sanctions are lifted. We plan to increase production immediately after lifting the sanctions. And after four months or five increase. Plan to manus a group owned by nbk partners has received financing to purchasing. South korea is tescos largest market. Fran stores and more than 6 million customers a week. Hundreds of migrants are gathering outside of budapests Main International railway. Are live pictures were bringing you now. Hungarian police blocked them. This is the second day of seeking asylum in germany. Coming up, it is an exclusive. Thats what we do best at bloomberg. It is with the iran oil minister. He said the country will boost production by a Million Barrels a day. And netflix is choosing japan as its first step into asia. Asos stepping down after 15 years. He cofounded the business. Manus welcome back to the pulse live from bloombergs European Headquarters in the city of london. Oil may have dipped back to below 45 a barrel but that hasnt derailed irans plans to boost output as soon as sanctions are lifted. Elliott gotkine has a little more on this story. This is an exclusive story we have, elliott. How much oil are they proposing to put back on the market when these sanctions are lifted . Emily well, in the first elliott well, i suppose the main thing iran wants to do is grab back some of that market share it lost during these crippling economic sanctions. Once they are lifted they want to try to grab back that market share as quickly as possible. We plan to increase our production immediately after lifting the sanction. Half a Million Barrels a day and after four months, five months, we plan to increase it nother half a Million Barrels. Quota is ts current 30 Million Barrels a day. It is already overproducing according to that quota. That is part of reason for the supply glut we have on World Markets now pushing prices lower. When you have more oil coming onboard and irans ambition once it gets investments, will be no doubt to produce even more than that, could only presumably put further downward pressure on prices. Manus we have to see how much they can produce, elliott. Elliott gotkine, our middle east editor. What a roller coaster ride we have had in oil. From an economists point of view, this has been a huge threat, inflation rethreat despite a 25 turnaround in the past three days. Yeah, absolutely. From an economists point of view it is not all about demand, supplies. An extremely important part of the picture as we have found out over the last year or two. With regard to inflation or reflation prospects, there are some concerns that the euro area or u. K. Might be close to zero. Inflation expectations in the medium term there are not quite so many concerns at the turn of the year that we would be in a disinflationary environment. Manus we have the e. C. B. Tomorrow. Were going to get some new estimates. Were no further on with inflation than where we were at the start of the year here in europe according to fiveyear. Where inflation will be in five years time. Give me your sense of the e. C. B. Tomorrow. The e. C. B. Has been relatively upbeat over the past couple of meetings and saying that perhaps there are not too many or as many Downside Risks as previously. You have had several things. Obviously one is the fall in oil prices which we have been talking about. The euro has risen as well and you have more ground ball uncertainty coming out of china. I would be surprised if mr. Draghi is quite as updebt as in july and just before the summer. And perhaps what the e. C. B. Says is that it reduces the hicp or its inflation forecast. Septembers meeting will come up with a new forecast. I had also emphasize the q. E. Program can be extended or the pace of bond buying can be increased. Well get if you like a warning from the governing count that if necessary the e. C. B. Can ease more aggressively. Manus were clamoring for more from the e. C. B. The euro is the second best perform tovering past month up 3. 49 . Thank you for coming in. Great to get you to share your thoughts with our viewers. Come up right here on the pulse, a different kind of cyberattack. Well have a look at a new team at barclays attacking the banks defenses, all in a race to find the holes before the hackers do. Thats what you want to do. Stay with the pulse. Manus welcome back. Why would a company hack its own Computer Systems . Barclays has set up a new team to do just exactly that, to attack the banks digital defenses, find the holes before the thieves and the terrorists exploit them. Lets bring in steven morris, our banking reporter. This makes good sense. Yes, it does. It is strange they have taken this team in ng house. They have been testing it for a while. They got their new Security Team in place and brought in this new team and are hoping to plug some holes. Manus should we be more worried that they were not more more ball and throwing resources at this . Did a conference yesterday that said the internal threats are incredible as well as external threats. Indeed. Barclays is the latest to start hiring spies and top policeman from the government organizations in the u. S. And europe to try and protect themselves from external attacks and also keep a very close eye on what their employees are doing. We have seen a litany of standals. It is just as important to monitor employees as well as external threats. Manus i love the way you say employees and spice and monitoring. Compliance takes on a whole new role. Thank you very much. Our banking reporter there. Up next on pulse pus, netflix trice its hand in asia. First up, it will be japan. Thank you. But will it succeed . It is a tough market. Now when were back, we are going to talk a little bit about markets and netflix and what they are up to. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Manus welcome back to the pulse live from our European Headquarters in london. Im manus cranny. These are our top headlines. Chinas benchmark has fallen on the last day of trading of this week for them. The shanghai composite extending its biggest twomonth loss since 2008. Traders reduced Holding Shares purchased with borrowed money for an 11th day. It marks a slowdown from the first three months of when g. D. P. Expanded by 0. 9 . A slowdown in exports weighed on the aussie economy. Government and Household Spending helping keep the number bo zero. Oil has continued to slide. Brent below 50e a barrel. W. T. I. Below the 45 mark. A u. S. Government report out later is likely to show that stockpiles rose by 900,000 barrels last week. The worlds biggest independent oil trader said crude will next 40 60 a barrel year. Live pictures from you. Live aimages coming to you from images coming to you from s of migrants. This is the second day that the Hungarian Police have blocked migrants. This story has been all over the european and the british news for the past 24 hours. Major news stations are camped outside there. This is the single Biggest Issue on the radar of european politicians at the moment. Lets check in with the single Biggest Issue for investors at the moment. How are markets doing . You have to understand. This man can explain it to you. Jon . Jonathan thank you very much, manus cranny. We started september in ugly fashion, down another percentage point. We were in positive territory and then rolled over on the dax. Things starting to stabilize on the ftse as well. The story today is about china. The shanghai composite this morning, i would say look at the interday chart. Down as much as 4 . Then the Protection Team came into the market and pushed the stocks higher. The composite finishes lower by 2009 2 . Ahode a twoday market close or the victory parade in beijing. Manus cranny, we talked about a slowdown in china. That is not a surprise to anyone. It has not crept up on us. What has crept up on us is a policy response. That nervousness about chinas ability to engineer a soft landing. Can they do that . The policy response from the stock market feeds the narrative that they might not be able to so. It means a weaker aussie. This morning on the back of that g. D. P. Figure you were talking about a drop below 70 cents. The aussie, weaker, weaker, weaker. Ill bring it up on a 20month chart for you. Down 22 against the dollar this 24 months. That is a route. That is fridge illity. What does it mean for the bond market . People start to recalibrate their expectations for growth. Germany bond yields got lower to 0. 77 . Anyone expecting yields to go much higher, on the bloomberg terminal today were looking at the benchmark 10year yield, back in july they were looking for something 15 basis points higher than that. A lot of people expecting the bond market to sell off. It hasnt happened the way a lot of people have expected. Manus cranny, back to you. Manus thank you. Ets cross over to surveillances tom keene. I have a number for you. 113 hours. That is the amount of time we have for the Chinese Markets to be closed and a little bit of relief. Tom maybe there will be a little bit of relief. I like the linkage between what we see in china and the weakness in the australian dollar. Really, manus, the equity markets are the focus. The jpmorgan private banker will join us. Well talk about a more optimistic stance but createdically what do people actually do given the new volatility. Many strategists with too many opinions. On wall street well talk with ralph. A perfect time to catch up with him on what m a is doing and also the costor on wall street. These are markets that are just daytoday and tick to tick amazing and of course all of the new things including oil and inventories that well see this morning. Manus those oil markets, that is just surreal, isnt it . By anybodys imagination. One thing that came up this morning, the head of equities from fidelity said he had never heard so much verbiage about rate hikes. That were obsessed. Tom yeah, im in that camp. His new idea of shifting a little bit to october. We are guilty of that because we have such good data capture on the bloomberg terminal. But at the end of the day the power focuses into what the markets do before. Then there is the game after. I believe it keeps us employed. [laughter] manus tom, there is nobody more focused on that particular issue than myself. Staying in the game is a critical part of the agenda. Tom that would be true. Good morning. Mark ill see you at 11 00. I dont know where to go with that. That is tom keene with a lesson for me. One of the biggest changes in history is on track. Have you logged on to goog this will morning . Here is a lady who has. She is going to tell me what has changed. What has change . The logo has gotten far more simple. It is simple. Colorful. I think interestingly thement to be seen as friendly. All big tech giants trying hat. The reason it is more friendly, i know you were looking into that. Without the curly whirly bits. It is far more easy to read. It is far more easy to put on to lower band width. Of course google wants to be logged on in the emerging market where is your band width may not be so strong. We dont just go on the p. C. And use google anymore. Manus i use a variety of screens. Caroline exactly. It wants to follow our trajectory and go across its product. To be agnostic, caroline. Caroline exactly. Across the board it is trying to develop itself and it has put a lot of thought months throughout this year, it got together hundreds of designers. They kick started a project called a sprint focusing on what they could do to change thelogue across the board. We were looking at using Voice Recognition as well as just typing. Lots of ways they will be immediately noticed across the screen. You nly the change in have a capital g that is multicolored and new set dynamic dots that move around as you transition or use interactions. It is following us through our google journey not just searching but interestingly when youre using Voice Recognition. All of the other products, youtube. Interestingly, this google logo looks far more like the alphabets Parent Company logo now. Manus talk to me about netflix. I love this product. Flicks you have net at home . Manus i have netflix at home and amazon at home. Im not greedy but i have cbot both. Caroline it is about the content they provide. Exclusive content. Interesting, they are moving into japan. They are already in about 50 countries but the chief executive, huge aspirations, wanting to get into 150 more by the end of 2016. They are kicking off asia with japan. Japan are technology savvy. They have broad band in most of their homes and already they have perhaps a little bit more of an in than china and asia. They have some wooing to do. The japanese are not used to changing up, to paying for their content. At the moment they tend to use one of seven free broadcast networks and they can record what they miss. Now only 30 are subscribers to paid tv compared to 85 in the u. S. There is therefore a lot of market to be won. They are going into this market with partnerships. They are using they are marketting a product to preinstaal it into mobile phones and getting panasonic an sony. They have some friends they are working and partnerships that they are using. It goes live today in japan. Amazon, which you also have, prime tv, that goes live this month as well in japan. There is a sudden race to get into asia. Well see how they compete, not to mention apple is getting exclusive content as well. Manus across the board. I just want wait for that moment of when the whole of asia is able to tweet and understand, i love that woman more than sharks love blood. House of cards it is going to be big. It is going to be big in japan. Hank you for the update. Google, a major rebrand and netflix piano. Were going to stay with the theme. Were going to have a chat with the c. E. O. Of lendco. Stay with the pulse. Manus it is the third annual gathering of bankers in frankfurt. Our man on the ground is hans nichols. He has a very special guest. It is the c. E. O. Of lendco. Hans, take it away. Hans thank you, manus. Im joined by one of its cofound rs. Thank you very much for joining us. My pleasure. Hans you do peer to peer lending. The y realize youre competition . I think in germany it is three years behind the u. K. And u. K. Is three years behind the u. S. Hans when you look at what you offer customers, what can you offer them that all of s cant . Nk we take the credit out of the banking the two customer groups that we have. Really the first time because in the past people couldnt really invest. It was really something only the banks could do. Hans how do investors get their money back . We dont take any creditors. Dont put all of your money in one single thing. Hans youre offering diversified products as well . They can get an individual an and invest in different structures. Hans how much concern is there about new Capital Requirements . No regulators . Not so much concerned about egulation. Dont put in the adequate mount of and we hope that you can enting it that avoid in terms of regulation the u. K. Nified moving ahead in terms of regulation. Other countries, germany, for example, the regulator hasnt hans you want more support. That would be great. Definitely. Hans you how many regulators would you say you have right now . We are active in seven countries and reporting to seven different regulators. Every regulator is different. Hans what is the next for you . Is it going to be to apply for a banking license and do that yourself . I cannot comment on all of the strategies. Hopefully we can unify the setup we have. Hans i think that is a pretty strong hint that youre thinking about applying for a banking license. Might be. Hans well take that little bit bit of news. They are calling the bell and the bankers are going to head back in there. Manus they are behind you, the bankers. The banking at symposium. Now asos has announced its c. E. O. Is stepping down. Paul joins us from our Bloomberg News team. Were not getting much reason or, you know backing up why he is going now . Hasnt really explained that, manus. It is not really that much of a shock. Most of the analysts today are saying this is a surprise, it is not really a shock in terms of the timing maybe more of a surprise. But they had a number two he has had a very nearby number two now for nearly a year. Nick was the c. F. O. Manus what do we know about him . What is this successor going to be in terms of personality and delivery . Like i say, he was here for about four years. Last year he was given a much more operational role. Chief operating officer. He has had a much more hands on job in running the business and now he is going to get the overall job in running the business while Nick Robinson gos into the background. Manus are stocks down . The stock is down this morning. This is the founder. This is a man i think as you said brought this business from zero. He was a founder to what, a 2 billion pound business . They are a little bit disappointed by the shift. I dont think it is that disappointing. Initially there was a kneejerk. Now shares are slightly ticking up a little bit. Manus they took the shock and moved on . Yes. It was a kneejerk reaction. People realized there was a status growth to be maintained here. It is pretty much a natural succession with nick baden coming into the hot seat now. Now were seeing it get back to a normal equilibrium. Manus the Competitive Landscape is not without its challenges. It is a time of change in this marketplace. You have to be efficient. You have to be so on the operational ball. What this shows us today is how things have changed. Under Nick Robinson the business hah has grown from a very small base. Being entrepreneur. Creation. Retailer. Selling things. They are not going away and neither are the traditional retailers. They are coming back strongly in the online space. Manus they are getting their online spaces. The Luxury Brands are really there is only one brand that stands out in terms of online delivery and that is burberry. Were going to take a very, very quick break. Stay with us. Were going to have a quick preview on whats happening with the u. S. Markets. As tom keene said we have got skin in the game. Well break it down for you after this very short break. Manus welcome back to the pulse live from london headquarters here. Were streaming on your ipad. On bloomberg. Com. We are really present. Now lets take a look at what is on the agenda for the rest of the day. Mark barton joins me now. Everybody is focused on friday for the jobs report but today is what i love to call the curtain raiser. The a. D. P. Numbers. Mark this will give give us a taste of how the job markets fared in august. It is the monthly private payroll report. The previous month saw an increase of 285,000 jobs. As you say this is a taste, the entree for fridays big release, the u. S. Jobs report which should show an increase of 218,000 versus 215,000. Will it lead to the fed raising Interest Rates in september . That is the only question that will come out of fridays jobs report. Today is a precursor to that. Manus probably everything is going to be focused on those numbers in terms of the wages. We saw manufacturing at the lowest level. I was out and about yesterday. We saw it come in at the lowest level since 2013. This is another important issue, isnt it . Mark it is because the factory orders we saw in june were quite strong. E sawen an increase of 1. 8 . Bloomberg economics wrote a piece avenue junes release saying the rise in factory orders was attributable to a spike in aircraft orders around the june paris show. It doesnt indicate more than a tepid rebound in the demand for u. S. Manufactured good which leads to yesterdays i. S. M. Report which is still rising at the slowist pace since 2013. Is that . Emerging e markets such as china. Manus people oftentimes dont focus on it but when were the ng for every nuance, last jobs report before the fomc, well take our measure from everywhere, wont we . Mark in july, the last release said the economy is expanding from mid may despite mixed Consumer Spending and somewhat less opt mitchell among respondants. That is out later. Manus ok, mark. Lets leave it there. Thank you very much for breaking that all down. Is the sun shining . Mark no. Announcer this is bloomberg surveillance. Tom the dow nears a retest of august 25 lows. Venezuelan and attempts festivities in beijing. So much from the open rally. Oil sinks a second day. What are you going to do with your new 201 k . This is bloomberg surveillance , live from our World Headquarters in new york. It is wednesday, september 2. Im tom keene. With me, vonnie quinn. Is the new guy heck of a i come back and there is a new microphone on my desk . Nothing has happened in the markets, luckily. Twosentenceyour takeaway on jackson hole . Brendan that volatility in the markets does not matter. And that volatility in china does not matter, that has been proven. Tom right now, lets get on the market data with our top headlines. Vonnie quinn. Vonnie Chinese Markets are closed. Celebrating