Dominating the headlines with president obama describing the shooting in california as an act of terrorism. Success inont party the first round of Regional Elections in france. The latest from paris with caroline. Hans nichols joins us. Let me take you to washington. The me take you to your former home turf. What you think the president was trying to do with this speech . What did he try to communicate . Hans he is trying to reassure the public. He uses the oval office for very somber occasions. Part of that was other rooms in the white house were occupied by christmas holidays. Publicrying to brace the. Here is how he put it. Quit the threat is real. The overcome it threat is real. We will overcome it. Wont depend on tough talk or abandoning our values or giving in to fear. That is what groups like isil are hoping for. We will prevail by being strong. Resilient and relentless. By drawing upon every aspect of american power. Hans he did announce a strategy review. Unclear what sort of policies will come out of that. He is ruled out committing any Ground Forces to the fight. That is going be a main dividing line between the president and the republicans. What was the reaction to the speech . Hans there was a lot of criticism from the president ial candidates. Par for the course. Criticismrised by the from paul ryan. He was quite critical. He was disappointed, just a halfhearted attempt to distract. I will be watching to see whether on not whether or not relationship. Europeans turn to politics. Frances far right, National Front, making gains in Regional Elections over the weekend. The first time folks are heading to the polls since the terror attack. Put this in context. Give us a sense of how well they did. Recent jump in popularity of president hollande has translated into the ballot box. Three times better than their last Regional Elections in 2010. They are leaving the first round in six out of the 12 regions and mainland france. The governing party is only meeting in two regions. Has becomel front the front runner in france. Andeople express themselves with the people france raised its head. Ballots hads what announced. The National Movement is without any contest. It is hardly represented in parliament. Caroline two regions are the most at risk, the southeast of france which includes the french riviera. The candidate who came third in the two regions, the socialist decided to revoke their candidacy. Creating a republican barricade. Guy fascinating stuff. Paris, hans nichols central banking here in europe after disappointing markets which were expecting broader action from the European Central bank. Mario draghi spoke in new york city. He defended his decision. Consider the package that has been proposed by the committees as exactly it was as the markets have demonstrated, it was not a package that was meant to address market expectations. It was a package that was meant reaching of our objectives of inflation. If we had to intensify the use of our instruments to ensure we abilitythe price mandate, we should. No limit to how far where able to employ our instruments. Guy lets introduce our guest. Aul webber good morning. Delivers a lot of stimulus. Do those two things fit together . Think a lot of angst has been because of hauch of how crowded that trade was. Eventsld see the market in the last few days in that context. Regionseeing the recover. Going to be growing similar to other developed markets. We think there is a regional basis. Makes itome ways it easier for u. S. Investors to invest into europe. They dont have the currency risk as they did before. Maybe we can take the currency a little above parity. You can understand that part of the trade. It is always easier to put money to work. Simon we have been trying to explain to our clients that most of the your risks is on his way out. The gross outlook was better than it was. Handsn invest on an on thats on hedge basis. Saw the draghi drop that we , time to get in. Been taken the opportunity to add in stocks across the region. Guy when you take a look at what is going on in oil, one of the biggest drags his Service Companies and oil majors. Do i need to rethink my trades come monday morning . Im looking for these Big Oil Stocks and thinking how do they maintain those dividends . Simon were seeing across the oil sector, dividend cover is very low. Whether that is sustainable depends on whether the oil price can recover. It needs to recover by the end of next year. I maintain a pretty cautious approach. We may get some bounce next year when some of the supply cuts come through. The important thing is to focus on longterm demand. That is coming under more and more pressure because of some of the other technologies. We got the paris climate talks going on. The demand outlook is at risk. Guy when i think about next year, a lot of people do worry about it, where is my income going to come from . Simon well see some dividend cuts. In those exquisite factors. Well see the prospect for dividend growth. Were interested in Sustainable Growth companies coming from Companies Like health care. There is a lot of interest in pharma. The banks are getting through their regulatory the Banking Sector could perform better next year. Guy i want to talk to you about that later because the weekend news out of it bif. There is more revelatory work to be done. We will talk about that later. Simon weber will stay with us. Our radar . Limit tell you, bloomberg sources say barclays may cut what percent more of its banking staff. Ceo speaks of possibility of cuts coming. 3 16. S the decision comes amid a legal battle. A breakup fee percent softer. Energy stocks have slipped. Opec gave up. At a chaotic meeting in vienna, opted to keep pumping in that effort to squeeze nonmember rivals structure for nonmember be low sia will will fall below 38 in the following weeks. Up next, chinas Foreign Exchange reserve falls below the . 5 trillion. Pboc intervention. Coming fresher coming pressure on the yuan. Guy 14 minutes past the hour. Welcome back. You are watching the pulse pierced streaming on bloomberg. Com. Chinas Foreign Exchange reserves fell to 2. 44 trillion. That is a big number. Lets find out what it all means. Tom, the fall was expected. Talk to us about the reasons behind it. There are a couple of factors at work. Firstly, chinas this is his. Chinas investors chinas businesses. Chinas investors have expectations that it will weaken in the weeks ahead. Chinas central bank, the peoples bank of china isnt ready to allow the market to do its work. To allow the market to push the yuan lower. It continues to spend large quantities to expand chinas Exchange Rate. Guy how does that fit sidebyside with the news we learned about central bankers have lowered the range. Put those two pieces of news together for me. Tom we need to disentangle daytoday movement in chinas Exchange Rate from the broader trend in chinas management of the Exchange Rate. The daily fixing can go up and down. Sometimes that can be a signal. A change of strategy by the central bank. Sometimes it isnt. At the moment, views on the yuan are sharply divided. Some expectation that the yuan a immediately set to go into depreciation pad. Press next week, the fed meeting could be the trigger of the China Central bank losing grip on the currency. Todays fixing was a sign of things to come. The alternative view is really Chinas Central Bank had a nasty shock in august when the many devaluation of the yuan past. Intensive selling pressure on chinas currency and light flows. The fundamentals of Interest Rates are set to change when the Federal Reserve moves toward a Interest Rate increase. Bresky system bank is not ready to lose its grip on the currency. To keep the currency stable in 2016. Guy big about how longterm actually works out. Lets go to our top stories. U. S. Crude trading below 40 a barrel, this after opec friday gave up all pretense. Ryan chilcote was at that meeting friday and joins us. Lets talk about the price reaction to what we have seen. Ryan there are various signals out there. The bti, 39. 50. I would love to talk about wti precisely. That has a lot of traders saying where we going to go next . 37. 75. For 2015 was if you go below that, we test the lows of 2808. 2008. Where below the 100 day average. Sell signal. Beyond that, you look at the options market. In the day friday, this is after opec after the opec meeting has concluded here and number of options out there betting on decline. Them or four fold more of than options betting on an increase. The market right now is very bearish on the price of oil. Guy ryan, quick oil question. The market is already bearish. Give me your sense of what happened friday. It was a very chaotic meeting. Pretensely gave up any of being cartel. Isnt that the right interpretation . Ryan the biggest take away is we ended up with an organization that was a desk that was unable to decide on anything. It is not a good thing to roll over the production ceiling or increase the production ceiling. They came out of the meeting unable to speak in one voice. Unable to agree on what they decided. That is the single biggest issue. It creates uncertainty about what opec might do in the coming year. What the value of opec is. We had some minister saying they agreed to raise the ceiling. Some say they left it where it was. Thats theral secretarygeneral said they decided to wait the secretarygeneral said they decided to wait until the middle of next year. We got the trade signals from the nigerian oil minister. The president see that the presidency of opec saying at the price continues to fall we came away confused about what opec really wanted to do. They were unable to come to any sort of decision and ready to go home and a hurry. Guy simon weber joins us from shoulders. Salmon, the bls post simon, a lot ofalks about turbulence elsewhere. Weve got what is happening with oil, minister draghi. Talk to me about whether or not we should listen to the pis. The problem is you want to take the chips off the table. Simon we should take we should Pay Attention to that risk. Very low Interest Rates. Building Performance Records in that phase. Companies have taken on those of leverage. Not uniform across the corporate sector. As weates start to go up are going to get in the u. S. , we will find out who is wearing close when the time goes out. We need to be paying attention to that. The Financial Markets and corporate sector. Guy will be get a contagion. Lehman brothers. Will we get a contagion . And brothers. Tom cole simon it depends on where. Banking industry is much higher than going into lehman. The there is risk outside of the there is risk us out of the Banking Sector is well. Well have to see. There will be problems that are very difficult to foresee. Guy the problem with the situation at the moment is if i am a portfolio manager, i dont want to get into cash because if this thing doesnt blowup in the near future, i am in trouble. Hang in there and ignoring the Warning Signals will provide problems. Simon youuare that . Do everything. You can be very careful around leverage. That is what we have been trying to do is think about companies and are notnovation just financially engineering to invest our clients money. Guy this risk is in there and growing. Something you need to Pay Attention to. Simon the longer we have zero Interest Rates, the bigger the cycle problem. Guy simon weber is going to stay with us. Lets check in on the markets. You got dropped the bounce underway. The stocks in turn up 2. 8 . Electrolytes feeling the pain. Ctrolux feeling that electrolux feeling the pain this morning. Electrolux down pretty sharply this morning. What are we doing 2016 . We started the conversation and we will carry on with that. See you in a moment. I have no idea. Taking the stock market shortterm it is time to pick some of these artists. It is again. The best you can do is know what you own and know what you are short and have an opinion about that. I have no idea. Jim chanos talking about his productions for the stock market or lack of ability to predict the stock market. Still with us, simon weber. We havent talked about technology yet. Were coming out of the talks in paris. He focus on green tech the impact it is good to have. Weve got oil trading where it is. We have acceleration in these technologies. When do we get the crossing point . Simon we did the crossing point now and it accelerates the next time also fuel prices have an up cycle. We now have the tools. Cheap solar, cheap storage. Linking that altogether, you can now disrupt the auto and power sectors and achieve much of that vision which negotiators in paris are trying to achieve. Driven by the technology itself. It is becoming costeffective. Guy the longer it carries on, simon that is all we will never let here locally voiced by opec. They know the pace of substitution will be much and 80 to 100 oil. Ofis easy to see a lot disrupted companies, legacy financially stressed companies, fossil fuels that are not reallocating capital away from those industries. Guy youre talking about generators . Simon yeah, those assets. Stranded assets and coal mining. Are going to be talking up were going to be talking about a lot more producing electric vehicles that are substituting these engine manufacturing plants as well. Echo are you investing like this now . Guy are you investing like this now . The whole thing is going to fall apart . Simon and we are having conversations with management teams. It is a long life as that. How sure can you be that this will be utilized and you will make money . On the flipside, we are really much more positive on companies that can be part of making this alternative powertrain a future reality. They will have sustainable earnings. Guy given that a lot of the stuff is still in the lab and get to get out, what is your ability to predict what works . Will know all of it in a little bit . Simon we dont need to picking technology. It is come down every year. If you have ever driven a tesla, my advice to everyone tried and you will not disbelieve that electro vehicles have a big part of the future. I have been through a number of cycles in the biotech industry where you say i dont understand science fully and there for what i do is i own all of it. A fairlylaid out straightforward argument for a number of these areas. How do i capture more of that . How do i capture the extra little bit echo is it by Portfolio Management simon our approach is did try to understand these emerging companies in the best in it. And to build a portfolio of those companies. You can have overcapacity and even the best new growth industries. You have to be careful selecting those companies that have a true edge. Blanket lying, it is being very careful. Simon, great to see you. Lets get you up to date of what you need to know. Caroline Energy Stocks have slipped after opec gave up all it is essentially opted to keep pumping in an effort to squeeze nonmember rivals such as russia and the u. S. Barrels below 40 per and there are a Record Number of bets that it will fall below 38 in the next two weeks. s described last week shootings in california an act of terrorism. Congress to pass tougher gun laws and asked lawmakers for new authorization for force against the islamic state. We have no evidence the killers were directed or were part of a broader conspiracy at home, but it is clear that the two of them had gone don down the dark path of radicalization. They had stockpiled assault weapons, ammunition, and pipe. Ombs this was an act of terrorism designed to kill innocent people. Caroline terrorism and the refugee crisis have also come regional in frances elections. According to early polling data, it has taken more than 27 of the debate. Guy, back to you. More on thatt story that caroline was just talking about, the french Regional Elections. Eurasia Group Researchers joins us now. His is better than we thought how strong a victory was it and will it translate into reality . Disagree, i think it was what was expected and she might be slightly disappointed. The polls were showing her at about 30 . We have to wait and see what happens. It certainly means they are now a Political Force that is present on every ballot. Guy what does this mean for Nicolas Sarkozy . This is a midterm for them and if they won a lot of regions last time because sarkozy was in power, so it is more difficult for his republican party. I think the biggest problem will be in how they coordinate a message between forming united fronts and maintaining their identity they sing socialists. A coalitionet effectively . Is that what the reality is going to end up being . Charles the socialists are pulling out of some of the races says republicans might be able to say they are not taking part in the coalition, but they are being helped by the fact that the socialists are pulling out. Theres also the fact so they are only really two regions where they are contenders. The are favorites. Guy why are people waiting for them . Frustration with mainstream politics . Charles they have tried the center right and left, not feeling great about the economic guy . Ion so why not what are the implications of at policy you look formation and how it is going to shape french politics, what do we think french politics is going to look like . Charles we do not think the pronational will win in 16. Inference of the centerleft, not so much on economic policy, but you may have noticed after the terrorist attacks, the socialists copied a few ideas. I have been calling for this much longer than anybody else, and they are the only people capable of defending