♪ anna: end game for greece. they deal with european creditors remains elusive. manus: disappointing investors. bhp billiton shares are dying after interview with a $9 billion valuation, missing analysts estimates. mark: the conservative party got a surprise majority. plus, up to 100,000 job cuts over the next five years as george osborne tightens the purse strings. anna: and the islamic state
takes a key iraqi city. we tell you what a victory means for the militants after the u.s. kills a senior leader in syria. ♪ mark: "countdown hello, welcome to "countdown -- hello, and welcome to "countdown." i am mark barton. manus: and i am manus cranny. anna: a south african finance minister, in just over an hour's time. manus: let's get straight to the markets now and bring you up to speed with everything that has happened overnight. joining us from hong kong for a look at the asian markets yvonne, we have these chinese property prices.
run us through these details. yvonne: there were actually some more signs of recovery that we saw in the chinese property market, the second straight month of recovery, and we are seeing a lot of this in terms of the stocks, asian stocks in general really a mixed picture. we did see a little bit of a selloff starting in the morning but now slowly seeing some gains, but again, the chinese property prices looking slightly better. fewer saw home prices decline. it was 47 out of 70. the pair that back in march 2 49 out of 70 and before then, back in february, it was in the high 60's so before that, looking much weaker before. we are seeing a property market that is potentially stabilizing right now. we are seeing the government use the property curves.
that is helping some of these property developers, and we have also had three property rate cuts. we are seeing a selloff in the hong kong stocks right now, down about three quarters of 1%. we did see those march machine orders coming out from japan that looked much better than expected. 2.6% for the year. economists were actually expecting about a 6% decline. that was a beat. and estimates, right at about one point 5% growth, and we are also expecting industrial production to come out, as well. in terms of the market, japan, we are seeing some of these corporate trying to give back to investors, which is something prime minister shinzo abe really wanted. to be she, let's first talk about the coffee prices in china, seeing -- some of the
property sales, a big selloff. this is one of the big bankers and lenders in japan, returning to profit. they have said they will be buying back shares. we did see quite a bit of that. i did want to mention php, down half of 1% now. they are having a spinoff with its mining company. we are seeing the stock kind of a just a little. it tumbled as much as 10% this morning, but they have spun off from this, and we did see their valuation coming in at about $9 billion, and it also missed estimates, so some of the big highlights coming out this morning. lastly, i do want to talk about the aussie dollar. we are watching this closely because with the rba minutes coming out tomorrow, the member that policy meeting where they cut those two that fresh record 2%, and those coming out could be a highlight to watch, because the aussie dollar has fallen for three straight days, now hovering around 80 u.s. cents,
and the deputy governor spoke in a speech and it weighed on the aussie dollar a little bit, and indicates the rba may still have some scope to use, and they may offer, these minutes, a little bit more about what happened are in that orderly statement, so the aussie dollar may fall lower. the key we. -- kiwi. and this is coming out on the 21st. that to you guys. manus: yvonne, thank you very a wrapup of that action. yvonne man. mark: accident from pledges to and austerity as the nation's banks run short on collateral needed to stay afloat, and a deal with european creditors to unlock bailout funds remains elusive. let's go to have hans nickel --
hans nichols. déjà vu. hans: we talked about a lot of deadlines on this show, and it seems like he will make one final push at the summit at the end of this week, but here is the issue, mark. his partners know just how strapped for cash the greek government is. they have reported that he wrote madame lagarde at the imf a letter, talking that how close greece was to defaulting missing that payment that was due to the imf last month. now, they ended up making that payment, in part, mark, from drawing on some emergency accounts they had at the imf, so they used imf funds to pay the imf. it is unclear if they will be able to do that this week, this month. they have got the big payments coming up in june. remember, june 5, they have
about $300 million due to the imf. there will be some busy meetings coming into it. and here is the issue. it seems like there is a question as to what is the greek mandate. his government is interpreting it one way. here is the freshest quote we have from athens area they say we are striving for a mutually beneficial agreement by friday. our mandate from the greek people is to reach an agreement where he stay in the euro area without harsh austerity measures. the big question of just what is the greek mandate, what the new government mandate is, that is going to define the debate this week. one final note that $7.2 billion left in the bailout fund, 3.6 of it is controlled by the imf, and, mark, the imf be taking almost a harder line than what you're hearing out of some european capitals. mark? mark: hans, how much breathing room do they have? hans: there is this idea of how
much ceiling do you have with the emergency the quiddity and right now, 80 billion euros is what they can draw down. according to greek officials, they have enough collateral to get to about 95. if you assume they are getting about a 2 billion increase every week that puts you at about seven or eight weeks before greek thanks run out of collateral to access that, but here is the crucial point. if the ecb decides to impose haircuts on the kind of collateral they will accept, that 95 billion number drops down to 88 billion, and the eight week grace. -- grace period drops. this even has more significance this week than in previous weeks. mark? mark: hans nichols. anna: yvonne was mentioning it,
missing estimates on debut. about 9.1 billion dollars, and joining us now from melbourne is david. david, good to see you. what has the response been so far? david: good morning. it began trading in australia this morning. based on its opening trading price, it had a market value of about 9 billion u.s. dollars. that missed estimates, and that was down to a couple of things. or is some caution over the limited organic growth option, and there is also some concern about being to vested into the company by bhp. many of them are older, aging assets, and they potentially need some work to extend their lives, so that is a source of concern. anna: so what are investors saying about south 32's
prospects? give us more details here he is david: investors are looking for a couple of things. one, the extent to which is company can cut costs, and the key issue really is the future potential how it can achieve growth, whether that is from expanding some of those existing mines, or whether it is through making acquisitions and looking for deals. now, the ceo was talking to bloomberg earlier, and he said that the priority for the company is going to be to first have a really good look at the assets that it holds. he said many of them have been starved for attention, and i guess of cash for some time, and inside the bhp bigger portfolio, they want to have a really good look at what they can do, what the potential is for them before they turn their attention to, i guess, potential deals. that is his priority so, yes investors really looking to see
what the strategy is going forward, and the ceo says they will probably be taking the market on that towards the end of the year. anna: what about bhp? you mentioned these are the unloved assets? is this why they divested of them into the separate company? david: sure. this is been a key part of it for some time for bhp. with its portfolio, it wants to focus only on iron ore, copper a much smaller suite of assets, about $6 billion worth of mines and other assets it's about 2012. it is all about making additional cost savings and about focusing on as much profit. in fact, the ceo describes it a bit like a restaurant. he says at the moment, they are kind of slamming ready meals into the microwave, and with this process and with this process of verification, there will be a cordon bleu chef serving things that. anna: that is a lovely metaphor.
itself32 going to be a -- is south32 going to be a takeover target? david: that is an interesting question. some people are looking for mining assets being headed up by former mining executives, mick davis, the ceo of extra on a. -- ceo of xtrata. and they offered about 10 billion for many of these assets last year so yes, certainly the market will be looking to the in this becomes a takeover target certainly looking to see how quickly that occurs. anna: david, thank you. david stringer joining us from melbourne. manus: isis has taken hold of the capital ramadi after burning down the central police station.
u.s. secretary of state john kerry says he is confident the grain will be reversed in the coming days. our middle east editor elliott gotkine has more. elliott, this is being seen as a major victory for the islamic state? elliott: a huge victory, also in propaganda terms, and if it is a huge win or the islamic state it is a setback for the iraqi military and the allies in the united states. they have held their biggest city, mosul, for almost a year and now it has got the biggest city of iraq must be as his province, about 110 kilometers west of dad. there also seems to have been some tactical blunders or illustrations of some of the complexities going on in iraq in terms of the sectarian issues there. the iranian-backed shiite militias have helped win some games against the islamic state
recently were chomping at the bit to get into ramadi to push back the islamic state, but it was only on sunday that the provincial authorities they them the green light. the main concern is that this was a sunni state, and they were going to bringing in shiite-backed militias, you have been accused of killing out some revenge attacks or other attacks against sunnis and they were wary about letting them in, and according to the new york times, a cache of arms had just been delivered to remodel from baghdad, coming from the united states and russia. seeing those also in the hands of the islamic state, each now seems to have total control of ramadi. manus: they have suffered a number of substantial, significant defeats of late. does overrunning ramadi represent something of a turnaround? obvious the, it was iraq's biggest city last year, but a
lot has happened since then. elliott: manus it shows they are a force to be reckoned with. the united states seems to be taking this in stride. the loss of ramadi does not mean that the tide of the campaign has turned. secretary of state john kerry has been in seoul, saying he is confident that the gains by islamic state will be reversed in the coming days but also warns that difficult challenges lie ahead. the fall of ramadi also shows that u.s. air power, coalition airstrikes alone are not going to be enough without a much stronger, better trained, and better equipped iraqi army on the ground to deal with the threat of islamic state. islamic state has shown that even despite coalition airstrikes, which have been going on around ramadi, he can still make bees decisive victories. no doubt lessons will be learned, and the iraqi authorities are very keen to try to turn things around in ramadi
as soon as possible before islamic state has a chance to put some roots down, as they did in most of -- in mosul. anna: 300 -- thousands of jobs could be lost at whitehall. the civil service is at its smallest size in years. and prizes for london homes selling the most in nine months ending in may. prices dropped 2.3% from april and the london finance industry continues to hire despite the uncertainty that surrounded the u.k. elections. job vacancies it was a slight increase from a month earlier according to a survey mark: and you can join the conversation on
twitter. tell us what you are following. the last episode of mad men. here is an admission. i never watched an episode. downtown avenue. have you? manus? manus: i gave it up as it went on. anna: coming up on the program, we will take a look at how long the greek central bank can carry on support for the country's lenders and what that means for investors. stay with us. ♪
mark: let's get back to our top story. it could be as little as three weeks before greece runs out of money, according to some economists and joining us is a global macro strategist at a company. good morning. greece is not a film with an ending. it is a tv series that will run and run each week, year after year, so for those hoping the saga comes to an end at the end of this week, not a chance. guest: no i think they will be disappointed. greece started in 2009 with the announcement of the budget deficit problems, terry don in 2002 with the security purchase program. and we are still talking them at this same thing in 2015.
this is a series that will carry on and on, and we are probably in episode three right now, and i expect 3, 4 5, and six, and one of them i assume be a poorer. they cannot get rid of the debt. it is not possible for the ecb to forgive the debt. it is not possible for countries to ignore the debt that greece has so how do you resolve it? and greece is being very right in highlighting this problem. they are saying we followed your process of austerity over the last three or four years and what do we have at the end of it? we have a higher level of debt and we have an economy that is 25% smaller, and guess what you are suggesting we do? do the same thing again. so i think he is asking something very reasonable. if we do the same thing again, we believe we will be in the
worst position. anna: with the debt forgiveness can this happen in the eurozone? chico: there is a notion they will actually write to the debt off and make it nonperforming and try to reduce the coupons so it becomes less painful, and we'll try to extend the debt maturity so you will effectively never have to pay it again. now, if you were to do that with the bonds on the ecb balance sheet, essentially, the ecb is financing the greek debt. we do not really know what the resolution is. anybody i think knows that there is an elephant in the room, but nobody knows what to do. i think the other thing the greeks are guilty of is their whole process of negotiation. they had an economy that was recovering. in q1 we found out that the greek economy has now gone into recession. they have negotiated the problems openly and badly and flight is occurring, and this is actually exacerbating their own
problems. who wants to buy a greek asset if you know this is coming? i will buy it, but i will buy it for $.50 on the dollar. we will not see anything. a few months later, greece will have another problem. manus: 11%, and the recent high was near 14%. the stock market up. there are investors out there who do not believe the haircuts will get worse, and do not believe they will run out of money. chico: the one-year that you can pull off of the bloomberg screen, that has got a probability of default of 75%, so you have this strange situation at the market is pricing default at a higher level than potential bond markets, and we have to square that off. our firm focuses on strategic themes, and atypical head and shoulders top that most investors will bet money on have a 75% probability of being right, as well, so if you are a traitor -- trader you will bet
on that happening, as well. mark: you say it will cover some of the partial structural reforms, but you say it will not reduce debt levels to a workable amount. hence, the problems are just going to mount up in the next couple of years. chico: i think the problem is is that debt as a whole is growing, and we are not actually going to a road any of those debt levels. italy went into a great crisis with a debt level of about 100% and it is now over 130% and climbing. the other aspect is when we next go in recession, where will interest rates be around the world? we are talking about some form of said liftoff now, and where will rates be? would they be able to cut rates in the next economic recession? if you look historically, every rate cutting cycle in the u.s. has been between 500 basis
points and 750 basis points, and we have got rates at zero now so where is the next easing going to come from? i will make og europe, i do not think rates will behind up to stimulate the economy again. looking forward in years most central bankers have to be asking themselves, what are the tools in my box to help the economy again if a slowdown happens? anna: you say you do not think the low u.s. interest rates are actually helping the u.s. economy anymore. chico: there is an interesting point where qe loses its ability to stimulate the economy, and we may be there. one of the things that bernanke did, the ex fed chairman, on his bookings institute law, there was some a chemical framework for protecting interest rates. what was interesting is that he said his construction of the taylor rule suggests the fed funds rate should be somewhere
around 1.5%. the u.s. economy does not need the super easy monetary policy that we have, and i would agree with some members of the federal reserve that it is actually distorting asset prices. last week's comments from yellen i think are spot on. people are not actually pricing risk appropriately, and as we have seen in japan, if that happens, corbett's do not actually invest. they just buy back shares or increase their cash on their balance sheet. manus: we have about 30 seconds. will the fed move this year? chico: there are five rules that we have, and in 30 seconds, i cannot give you all of them. the fed will move if the data is strong enough, and the fed can move because the taylor rules says they have some room, but the way to make the impact the least on the economy is to continue talking about it in public debates like this, in minutes, and when they do that the market will discount it
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it seems to be questionable. that is the longest losing streak since 2014. you will have chicago speaking. there will be words and nuances. the bloomberg survey, we like those. they think the fed will growth targets to 2.3% from 2.7%. we know inflation is relatively anemic. the deputy governor of shelley isn't nothing has changed. we stopped the scope to lower rates.
last week, he had the sugar hit. and the aussie dollar. we are coming back. is it overdone? that is what we are hearing from the central bank. is that enough to stop the reserve? back to you. >> alibaba is being sued by luxury goods. they have accused a chinese e-commerce company of -- mary borrow spoke to bloomberg in an inclusive interview and how the transformers movies have
increased cars appeals to new groups of buyers. >> the introduced and created excitement for whole new generation of customers that are getting to the age where they are buying and driving cars. i was talking to a friend last night whose front once a camaro. he hadn't even seen the new one yet. i think it helps a lot to get that awareness and the excitement. >> amtrak will be resuming services tomorrow. the fbi is set to arrive today to help federal transportation investigators. you could find more on that story at bloomberg.com/ europe. anna: environmental investing in
the spotlight. in number of investors come including -- a number of investors looking at climate change concerns. gregory, thank you for joining us. talk about this trend we are seeing. you seem to have identified increasing levels of western in by shareholders. what is this all about? gregory: what we are saying -- seeing is it is having a rare shareholder resolution on climate change. they were in favor, which is pretty unprecedented. what are companies doing about it? in the u.s., they had a number focused on energy and utility companies. what are their plans? how will they respond to these issues? manus: i'm always fascinated it
when companies do things for the sake of the planet i question the motivation why? is it true leadership they want to show? gregory: you look at the investor site here at the number of other nordic investors have sent they will divest of certain fossil fuel companies. they are moving money out. another high cost companies. manus: i thought there's a great line from -- if tha is the caset, we have a huge cleanup to do. gregory: oil prices are off from their peak. i think a lot of investors are questioning. will this continue? maybe they don't.
maybe not is the time. mark: why are they facing so many environmentally resolutions? gregory: they're are the ones who are causing the emissions. that is potentially what is at risk. it is their customers who may be impacted. as well as utilities. they are focused on the end-user and the supplier as well. anna: got this business and climate summit taking place. i think the u.n. is repairing something later in the year. how will this story flow? gregory: use of the obama administration putting rules on power plants. it had cheap natural grass.
he had u.s. and china last year agree to limit carbon emissions. i think we will see more action up front. mark: thanks a lot. anna: you could join the conversation on twitter. you could find us. mark: that is where you'll find us. coming up, and his lucid interview with south africa's finance -- an interview with south africa's finance minister. ♪
aziz: now they are in danger after islamic state has control of the city. there should be fast reaction. manus: john says advances will be reversed quickly. do you accept that? do you trust that? the thing that is the case on the ground? -- do you think that is the case on the ground? aziz: yes. [inaudible] manus: can you hear me there? do you think these advances will be pushed back quickly? aziz: well, it depends. the people in ramadi haven't
seen anything from iraq forces. they need help. manus: we seem to have some minute -- these communications there with aziz. thanks to you in baghdad. mark: the prime minister's major to do list will be a pledge. one of the front runners and the labor leadership said he supported the holding of a boat -- vote. >> and we get to see there is clearly an appetite for a referendum. i have said very clearly and quickly that we need to bring forward that referendum. a prolonged period of
uncertainty -- mark: our next guest says the top 100 eu rules cost london pounds. thanks for joining us. that is a lot of money. what are the costly once? -- ones? vincenzo: and all costs are estimated over 4 billion pounds. -- annual costs are estimated over 4 billion pounds. i mean, there are a few. the list includes a bit of everything.
there are a couple of interesting points that could be made. 26 of the regulations have a higher estimated costs than benefits. the u.k. governments usually put -- in 26 cases the estimate cost is higher than the benefits. this imposes a net cost. they have signed off on it. almost the third of this regulation, there are no viable benefits. in this case, the u.k. government does say that the regulation comes with benefits. or investor protection and more transparency but there is no figure on it. anna: isn't that unfair if there are benefits that spill over? you could think of benefits that
are less costly it depends on how far you extended. they were introduced with other priorities in mind. climate change, for example. vincenzo: yes. the climate change one is a different story. there are quantifiable benefits in that case. we think those benefits have always been related. impact assessments based on a assumption that has failed to materialize. the assumption was it was going to be a global deal. to date there hasn't been one. a huge estimated benefit is over billions of pounds and has failed to materialize. it could boost trade across the
single market. of course, the key point is there is plenty for reducing the cost of regulation. what is important to stress is at the moment that is plenty of support for such a solid regulation drive across the european union. europe has said it would be happy to hear proposals on how to reduce red tape and the cost of regulations. there is plenty of hope. manus: one of the biggest challenges will be for david cameron to communicate with the electorate in the united kingdom. leaving the eu -- he needs to communicate that. in his two -- what is that? vincenzo: the norway option, we
don't advocate that as an option for simple reason. it is a member of the single market. it have to comply with the regulation. manus: maybe advocate is the wrong word. user does on route they could go. -- you say it is one route they could go. "countdown" it is one -- vincenzo: it is one option. we don't think it is quite the best one. they did the regulations applied to the european -- no one has to bear the overwhelming majority of the cost without having a say on how these regulations are decided upon. as requested other point you
based, of course it has to be mentioned. of course, the u.k. would be free -- would be more free to you regulate. there would be -- more free to deregulate. there would be -- the u.k. could save around 13 billion pounds. secondly, there would be domestic resistance. or would be sensitive issues climate change being one of them. are some contenders for the regulation. there are other pieces of
legislation. i don't think the u.k. would ever want to repeal that. mark: the eu is making process and cutting red tape. vincenzo: this is an important point. there is a person who is sympathetic to the agenda. he has been appointed as vice resident of the european commission, specifically in charge of reducing red tape. i think he has made a good start so far. anna: vincenzo, thank you.
persecuted. diseases still in need of cures. mark: tim cook speaking to college graduates at george washington university yesterday. manus: let's get you up to speed with some of the top stories on bloomberg at this hour. chancellor george osborne seeks to balance the books. that is according to "financial times." asking prices for london homes. concerns about a labor government for so-called mansion pact. london's finance minister continues to hire. job vacancies jumped by more
than 14% in april. that is a slight increase from a month earlier. anna: just over an hour from the european trade. let's delve into the digital output. i have gone for a photo essay they are known as in the trade of rejuvenation work that is set to take place at gare du nord. do remember the end of last year? mark: that's right. anna: it was the gare du nord station. he said that france's is hopeless and down the end finished. he had to apologize. there were very harrowing pictures. some beautiful of gare du nord. the talk about the changes they are making.
i like that. mark: i like to look at the u.s. box office. the acapella group has beaten "mad max." "pitch perfect" about an american acapella group. the sequel came out this weekend. manus: even better. mark: $17 million. it topped "mad max: fury road." do remember it? manus: i do. mark: we could see the -- sing the song. manus: no. [laughter] mark: "pitch perfect" has done remarkably well. manus: i'm following the money. $25 million -- my gosh, they have been busy.
you have been urging -- they have been earning $30 million. that excludes the property in washington and new york, along with their federal retirement funds. $30 million in more or less what they have earned. he'll occurrence between $5 million for her memoir "hard choices" and that clintons took in -- her speaking fees -- old tony -- just shows you there is great value in the clintons than tony blair. mark: what sort of dinners would one have? anna: a study what is coming up. -- let's talk about what is coming up.
anna: end game for grease. catch crunch as the prime minister says he won't back down on his pledges to end austerity. a deal with european creditors remains elusive ahead of this week's summit. manus: biggest mining spin-off in a decade disappoints investors. they debut with a $9 billion evaluation, missing estimates. mark: the conservative party won a majority. and a company could face a lot of job cubs. anna: and sthralmic state takes
a key iraqi city and the government readies a response. we will tell you what it means after the u.s. killed a senior leader in syria. mark: hello, welcome to "countdown." i am mark barton. anna: i.p.o. anna. and i am mannus cranny. she tells us why the camaro is making a come back. we speak to the south african finance minister in just under a half hour here on bloomberg. mark: the grease prime minister refusing to back down from campaign messages to end austerity, and a deal remains elusive ahead of this week's
summit. we are in berlin and in athens. hans let's start with you. cypras says there is another deadline. >> well, they are planning on push fog a deal at the end of the week at the summit. there is that summit earlier in april where that was supposed to be the deadline. that is when the recrimination started and everyone ganged up on him, who was running the bailout negotiations. here is what we have as of this moment. we have no movement from greece in terms of what they believe their mandate to be. we also have a newspaper reporting that he wrote madam lagard a letter that they were in real danger of defaulting,
not able to make that 750 million euro payment due last month if they didn't go ahead and get extra bailout money from that 7.2 billion left over. greece made the payment. though used an emergency funding system. here is the latest we have from the government. this is a statement from the parliamentary spokesperson. he is saying we are striving for a mutually beneficial agreement by friday. our mandate from the people is to reach out for an agreement where we stay in the euro without harsh austerity measures. we have talked about it before. what is harsh? we are no closer now than we were 120 days ago. it seems there is a split between the i.m.f. and certain european capitals. it seems to be toeing a harder line.
mark: how much breathing room do greek banks have right now? >> if you take a look at emergency liquidity assistance, they are at 80 billion right now. you take a look at a let of the collateral, and some of this is coming from our atheps colleague, and maybe he can explain it better. you have about a 95 billion limit. the e. c. b. has increased that russellly about two billion euros. that would give the greek banks another seven or eight weeks. if they tighten the rules and imposes a haircut for the collateral, you could only have 88 billion of worthy greek capital, and they would no longer be able to tap those emergency lines, and that mean big problems. >> let's go to atheps. how do they plan to end austerity and medical demands
at the same time? >> i want to say how he can deal with the two conflicting issues. the freak government all along meant to keep the negotiations running until the end of june. as hans said before and gave you the mathematics, the greek banks may run out of collateral maybe during the first couple of weeks of june. that would mean by the end of the month the greeks might have to impose capital controls. he has a political situation in his party. the radical left platform are the ones that keep insists on keeping the preelection pledges. he seems to be more negotiable on some lines, even if it is internal rhetoric, he keeps
saying he will keep the red lines. i believe that grease has to step up negotiation talks as soon as possible. it is not only the collateral on the banks that may be the problem. we have a cash flow problem as well. last week the i.m.f. loan repayment was met by the holdings count to make sure wages and pensions were met by the end of the month. there is another full billion euros to be paid in june. even if they kiwi indicate all of the remaining reserves, i am not sure it will be enough to meet the june payments. >> how do the greek people feel about all this? does the government still retain the support of the people? >> we haven't seen an opinion poll this weekend, but what we have seen is a steady decline in the report throughout the month. as we near the end game hopefully it is not going to be
a blame game at the end. people are feeling more stressed and anxious. as a politician, he has very good positive vibe to the society, and the greeks see that the government is trying hard pushing it to the brink of colorado alps. they don't like it. >> thank you. anna: getting breaking news from the chicago fed, charles evans. he is speaking in stockholm. we have some headlines coming from that speech. he is repeating his stance essentially that he sees reason to delay increasing interest rates until early 2016. he ought to make fairly dovish comments. inflation is too low, he says, and that is going to feed into
the idea of putting interest rates up. he sees no reason to be in a hurry to increase interest rates. >> let turn to the middle east. the islamic state has taken control of iraq's largerest province. they debt nayed six car bombs. john kerry says he is confident that the group's gains will be reversed in the coming days. our middle east editor has more. give us a sense of where this victory is and how it sets in the scale for the islamic state? >> this is a massive victory for islamic state, probably its biggest so far and greatest coup since overrunning iraq's biggest city a year ago. it follows it is a major set back for the iraqi authorities and their alleys.
the united states has been carrying out air strikes in other parts of iraq and syria. we have seen as well that some a00 deaths 8,000 people fleing as islamic state overruns the city over the weekend. part of the problem seems to have been that this wasn't unexpected. indeed shyatt did go smyth militias were cromping at the bit to get in there. it was sunday that the provincial council actually took the decision to give them the green light to go in, by which time it was too late. it is a sunni city, and it is the iranian backed shiah militias backing the forces, making up for the deficiency of the iraqi army.
they were not allowed in the city on time. and now as a result, islamic state is very much in charge. there are reports that once in the city, they carried out mass killings of both government personnel and civilians. >> and the islamic state has suffered a number of defeats of late, but people are reflective in how they have surged in power over the years. does the overrunning of the city represent a resurgence of their power? >> it definitely shows that they are still a force to be reckoned with. it is definitely an important propaganda victory for them and no doubt people who were thinking of joining islamic state will see this perhaps as another reason to go and join them. but there are reverses particularly where the shiite militias have helped push them out.
but the united states is taking things in stride. a pentagon spokesman says the loss of the city does not mean the tide has turned. john kerry says he is confident that islamic state gains will be reversed in the coming days, he has also warned up difficult challenges lying ahead. they will want to act quickly before islamic state has a chance to put roots down there. but there are concerns that for example large caches of arms have fallen into the hands of islamic state, providing reinforcement to them. this city is just 110 kilometers 68 mills, west of baghdad. it is and important victory for islamic state, and there are many battles in this wider war. the united states officially is saying this support something that should be seen as a major set-back. >> elliott, thank you.
mark: the biggest mining spin-off in almost a decade started trading today in australia. they missed analysts estimates, with investors valuing it at $9 billion. the chief executive spoke to us. >> we start day one with a strong balance sheet, which is important. and we start day one with a great set of people and assets. we have to do some work with how we take the assets forward. they sit comfortable in the cost curve. >> joining us is david stringer. what has been the response so far? >> well, good afternoon from melbourne. it began trading in australia earlier today, and a bit of a muted response. it opened trading with a value
of about $9 billion u.s.. that was under estimates. they were calling for a median of about $11.2 billion. largely the disappointment seems to be around concern for the potential for growth. they are seen with limited growth opportunity. just to touch on china, weaker expansion in china is seen as being a negative for metal producers. that seems to be the root of the slight disappointment. mark: and what are investors say about south 32's prospects? >> there is some good news and bad news there, i guess. in terms of positive it is seen as having exposure for demand gains. they want to see two things. first, the extent to which the
new company can cut costs. it has set about doing that, closing some offices. secondly and importantly, they want to know how the company will tackle this issue of where it gets its growth from. will it go ahead with expansions to some of its mines, many of which are old and near the end of their lives, or will it seek to acquire assets. you her from graham kerr. he said he will look at the assets and see whether this new company can realize its potential than b.h.p. when asked about m&a, he said look, the priority first is to crawl, then walk, and then run. his priority seems to be look at his own portfolio first and then who knows? potentially on the horizon look to make additions. mark: might they be snapped up? is south 32 expected itself to become a take-over target? >> well, he think there is an
acknowledgement that it could be a target. people familiar with x-k resources, the mining fund run by the former ex--strata c.e.o. told us that they are weighing a bid for south 32. those people said that last year x-2 had offered about $10 million u.s. for many of the assets that now form this new company. mike: thank you. anna: the top stories on bloomberg this hour. 100,000 jobs could be lost in whitehall as george osborn seeks to balance the books. osborn is targeting so billion pounds in cuts from the civil seniors. asking prices for london homes fell the most in nine months in may over concerns that the labor government would have imposed a so-called mansion
tax. prices dropped 2.3% in april. london's finance industry continues to hire despite the uncertainty surrounding the election. job vacancies jumped to 14% in april, a slight increase. you can find more on that story at bloomberg.com/europe. manus: join us on twitter. the chicago fed said there is no compelling reason to raise rates. mark: coming up, more on greece. when willits life line be maxed out? later, is the eurozone deflating beast to be blamed? and we are going to count down to the europe mark's open.
anna: welcome back. are we entering the end game for greek banks? the country's central bank could have as little as three weeks worth of capital left. our next guest says some sort of greek default is inevitable. simon, welcome to the program. the story around greece is actually putting you off some investment in europe at the moment? you don't see it as a contained peripheral argument?
>> where do you want to be? if you come back to a choice between the u.s. and the eurozone, i am still marginally positive on the eurozone because i think at some stage the euro goes down against the dollar. all the things that started the year like german industrials and the netherlands, and let's not forget sweden and svitolina land, all of those trades come back into play. mark: how do you adowntown for the 4% decline in the sto stanford stanford 600? >> the currency rate. the bond market on its own was obviously nonsense. manus: you say it was obviously nonsense. you have to take up bradge with that. the whole world was ripped through the bond market and
$450 billion was ripped out. >> there was a huge momentum trade. if you were in it why would you sell it? >> but the world owusu in it. >> absolutely it was in it. at some stage there comes a moment when you can't make it work any longer. markets, cycles. that is the way they work. mark: and linkage to equities? >> i think the really interesting thing that is the knock to confidence the knock to certainty, which is another way of saying what you are saying. what we see in equities is a complete withdrawal from the big sector positions. it is part any energy -- partly energy. but the other thing is if you track where the biggest loss of positions are the biggest reduction in positions and what
happens in the bond markets, it is almost one for one. the "big finish"est reduction is in the u.s. and then japan. if you do a one for one analysis, you just go fund managers are not certain what is going on reduce their bets relative to the index. why? because of the bond market. anna: you messaged the u.k., so let talk about that. you have some interesting ideas around that, particularly around commercial property. are you fairly interested in that? >> well, i think we have had -- we as a house have had a big position on commercial property. we have had it for 18 months. it was deeply unfashionable at the time. now we are basically calling it neutral. we are wondering what is left. we can see a little built of a post election bounce. if you are in a big post election bounce, you are going to see a rate rise sooner.
if you are concerned about bond yields generally, then commercial property may not look that clever. manus: you say you prefer japan, and you have hinted that a couple of times. looking at the nikkei, it has that tray jecty. is that linked to more currency depreciation? >> no. i think what i would say is the japanese government retains the option to to both, but they are not needed for the time being. the way i phrase it is the authorities in japan are in control of their equity markets, currency markets and bond markets in a way that perhaps the u.s. and european markets aren't. manus: does that frighten you, the government in control of the equity markets? >> the things that japan has is the put, which i have talked
about already, the ability to get public sector pension funds, and they are enormous, to buy in the equity market. they go from an average weight of 9% a year ago to a benchmark of 25 and upper limits of 34. the last numbers i saw suggested they have got to 19. so there is another 6% just to get to their bench mark. it is not just the public sector fund because this will become the new normal for japan and every single private sector fund will follow or explain to shareholders why they are not. mark: in the u.s. you are waiting on clarity from the fed. they are saying 2016. is that where we are headed now? >> it is a funny one. it depends on which part of the fed you believe, the doves or the hawk.
>> i think it is september and an outside chance for july. that is basically on the idea that there is a strong recovery in q2. mark: they were looking good last week. >> you would have expected the evidence to look a little bit better. but not 2016 twoicts. i would be puzzled by that. manus: sterling was up last week. more run? >> a bit more. we are in that area where if it topped out today, we would all go yeah, that is a reasonable place for it to top out. anna: thank you no joining us. simon goodfellow of harlan capital. manus: coming up, south africa's finance minister is speck in johannesburg. we will spake to mr. nene in an
flipkens is no compelling reason to rates. manus: there is no compelling reason to raise rates. he was speaking at a bank conference. did it really impact the dollar? not that much. he is a dove we know. there is no reason for the fed to be in a hurry to tighten rates. inflation is low. but will not reach its inflation target until 2018 and at that point should allow insflation it to advisory
shoot. those are the three messages from the chicago fed govern. if you look at the longer term sale on this, retail sales missing. traders are cutting their bullish bets for the seventh week in a row. that is the longest streak of pairing down bewellish positions since april of 2014. bloomberg has done a survey of 79 economists. the fed are going to be left in a position where they are going of to down grade their view on growth down to it.3% for 2015. the aussies, if you can't gement the currency to go down on its own, keep on talking about it. that is what the deputy governor did today. i think j.p. morgan summed it.
last week you had the sugar hit, which was a smaller than expectled budget deficit. that gave the currency the momentum it needed to take it higher. you can see the overall trajectory is on the up side. jaw boning the currency, we have a minute from the r.b.a. tonight and china, the flash purchasing manager's index, which of course will potentially have an impact on the aussie dollar trade market. mark: top stories on bloomberg this hoyer. alybabba is being sued. they have accused the chinese e commerce company as allowed the sale of fake goods on its platform. marry spoke to bloomberg in an interview about chevrolet's new camaro and how the transformers movies increase the the car as appeal to a new group of
buyers. >> this introduced and created excitement for a whole new generation of customers, who are getting to the age that they are buying and driving cars. i was talking to a friend last night whose son wants a camaro. he hasn't even seen the new one yet. i think it helps a lot to just get that awareness and the excitement. mark: and amtrak will resume passenger services in the northeast today. the line was shut last week after a train traveling at twice the speed limit derailed, killing eight passengers and injuring more than 200 others. the f.b.i. arrives today to help federal transportation investigators. you can find more on that story at online. anna: has oil's recovery stalled? fall volatility has fallen to the lowest level in six months amid speculation over
production in the u.s. let's talk to neil. great as always to see you. give us your thoughts? you see quite a lot of reasons for a fairly sluggish oil price in the second half of this year, don't you? >> yes. what we have seen, two things. number one, this collapse in u.s. shale production which was supposed to be visited on us when the oil price went from $100 down to $50. that hasn't happened. they have found ways to keep production up. on the other side of the balance, there hasn't been a significance response on the demand suppose. no big reduction on the supply side. we are stuck roughly in the range we are now. >>ed saudis just keep pumping it. they won't let go of an inch of mark share. >> they made a clear decision.
their response to the 2014 falling prices was not going to be the mistake of the 80's, to cede market share in a doomed attempt to keep the price up. >> islamic state how much is it exporting right now? >> iraq exports in two ways. the valves majority of iraq's exports are from the south. they are at close to record belves. they are getting close to three million barrels a day because the production that feeds the export terminals there has not been affect the. the northern picture is more complicated because of kurdistan. there has been disruption there. but the overwhelming majority of iraq's exports has carried on for what passes for normal.
that could change. the ramadi situation is reminding us that those who thought isis had peaked they may need to think again. there could be a situation that arises that the forces gain control over supply. there is a refinery that could be in threat. anna: many people at the beginning of the year as you have suggested, talking about how things are going to be more in balance in the second half. you said one of the reasons for that is people thought that u.s. production would fall back. why has it not fallen back as much as it looked as it might. >> the older new shale production we have seen in the last six or seven years or so
in the u.s. has a cost base significantly lower than the new production. the earlier estimates that it needed $80 or $90 a barrel to survive the new projects probably do. the older projects have covered operating costs they are significantly lower, $35 or $40 a barrel. the exists production whose cost base is slightly higher than that have found ways to improve efficiency of drilling operations. so it is a much more resilient and innovative industry than people gave it credit for. manus: i am going to make a subjective opinion here. it looks like baker hughes data, a number of rigs closed down last week. things have really begun to slow down in terms of the number of rigs being taken out of production.
as you look at the second half of the year, what should we use at to guide us? should it be baker hughes or demand? >> it is not just the number of riggs. it is what you get for the drilling activity. that is the key to this. the efficiency of the drilling operations has been hugely improved. it is not just a numbers game, although i take your point. what is going to guide us over the next few months, in my note, i was referring to the price is more likely on the down side than the up side. one key is iran returning to oil markets in 2016, which is a grabet possibility. the spanks of production in other places and resilience of places like canada. that is expanding fast. demand growth is not stellar. the key to this is china
growing slowly. 400,000 barrel day. they were growing by 800000 or 900,000 a few years ago. that is a big difference. you have all this supply coming to the market, and you have a key group of suppliers, saudi arabian gulf allies saying all this extra million barrels of day of oil demanded, we are going to be the suppliers of that. >> could we revisit march lows crude oil at $43 then $60 now? >> it is quite possible bulldogs always i said in the note, the international agency's number in terms of supply-demand balance for the second half of 2015, instead of the balance getting tighter and more bewellish for prices the
balance is getting weaker in the second half, if anythinging. i cannot see any significant upside to prices other than that isis forces gaining some control over a big chunk of iraq. >> good to see you as ever. manus: join us all on twitter. we are going to try and pop out some of those lines from neil on the oil market. the morning brief is up there at the moment. mark: coming up, is the yurds deflation beast slain? that is next.
inflation on an annual basis. data tomorrow may confirm that consumer prices ended a four-month streak of declines as the e.c.b.'s qe program gathered speed. forecast prices will stagnate in april only three months after showing a .6% drop. that is the white circle. the path since then is clearly an upward one. he is still far from achieving his goal of below but close to 2% of the medium term. the e.c.b.'s latest projections foresee an average inflation rate of zero this year. to many economists, those forecasts look overly optimistic. the second gauge is forward
five year inflation swap rate. tuesday, the yellow circle it hit 1.8425%, the highest since november. the trend clearly improving since the gauge. that red circle reached 1.48% in january, the lowest since at least 2004. we have been moving upward there. let's finish with a chart which reflects the prospect for did he playstation. it hit a 10-year load of 0.49% on april last week. it rose to a high last week of .72% and settled on friday at .62%. investors are worried that faster consumers prices could
stop the pace of consumer buying. the e.c.b. will see the program through the 2016 conclusions. these are the three charts that matter when it comes to deflation? anna: a health check on the economy of south africa tomorrow when the country reports unemployment numbers. the country is currently plagued by an energy crisis. its power grid cannot power the country, and rolling black outs means economic growth has stalled. joining us for an exclusive interview is the finance minister nhlanhla musa nene. if the federal reserve in the u.s. starts to tighten rates, is there a concern for the south african economy? >> let me start by saying that
we are an open economy. as small as we are, we are interconnected with the rest of the record. so any movement in the global economy will have an impact on south africa. as we would realize, we currently are at a stage where any movement in the tapering of the u.s. monetary policy has already been priced into our projections. the communication has actually been improved in terms of where the u.s. economy is heading. so our projections actually do price in a movement in that space though we cannot be accurate with regards to the numbers. but if you also look at where our separates are at the moment, our interest rates are actually at a quite moderate rate, which means they would allow for slight movements
upwards and downwards. anna: one of the concerns at the ratings agencies, moody's, is the overall debt level. they say this is a risk to your credit rating. how confident are you that you can bring down south africa's debt levels? >> again, the fiscal package that we announced during the midterm policy statement and reaffirmed during our budget in february are clearly on the path of fiscal consolidation in that we have clearly stated, and this is what we are committed to, and what government planning is about. it is making sure that there is revenue enhancement, but also there is a commitment to stay in the debt ceiling. but also our fiscal ceiling in
general. our fiscal framework is very clear, that we are going to be growing our expenditure quite moderately in other areas. we have been containing expenditure but maintain investment expenditure. anna: how important is it to you, sir, that you avoid a junk rating on your debt? will you do whatever it takes to prevent that from happening? >> at the moment -- i am not sure i am confident that we actually are not that close to junk rating. you would recall that what that would mean is an increase in our cost of borrowing which would actually put a squeeze on our expenditure. but also if you look at the moment at our exposure to foreign debt, it is kept as a very reasonable rate.
anna: you said today that an energy crisis is a major risk for the south african economy. could you give us a comparison to work out how big a risk that is? back in 2008, mines and factories were forced to halt production for five days. are we talking about something of a similar size to 2008? >> i think -- it can't be exactly the same size as 2008 because we are seeing a lot of recovery in our capacity, and we envision that quite soon we will have a new capacity coming out of the new plant, about 800 megawatts. and we have seen this time around the success of our alternative energy production.
it also has capacity. we already have got close to 2,000 megawatts in our program. we are he is indicating that to get about 5,000 megawatts out of it. most of the outages we have now are planned outages to restore the capacity we have lost through poor maintenance. those are related to maintenance, and in my view we stand a better chance this time around to be able to recover much quicker than 2008 because there is progress in building capacity. anna: how much private sector involvement are you planning for the electricity sector in south africa? will you ask the public investment corps to take a stake in the business? >> the private sector investment is currently on the energy side. what needs to be worked out on
the utility itself is making sure that the government maintains a majority share holding. anna: majority share holding. so what kind of private sector involvement does that suggest? >> at the moment we are looking at simpling ones like core generation. we have instances of i.p.p.'s. i believe that once those have been concluding, equity injection is there. anna: how are you going to encourage foreign investment into the south african economy minister? >> fournette investment is currently not in a bad state in south africa as we speak. we have a number of projects. our infrastructure program is attracting both domestic and fournette investment as we speak in a number of areas.
for instance trans-net rolling stock investment has actually attracted huge amounts of fournette investment. our economic zones are attracting a number of fournette investors who are coming into the manufacturing sector. we have a number of initiatives that are under way that are actually helping us to find the right synergies and partnerships with the private sector both domestic and fournette. anna: do you think some are put off by the changes they see in the b.e.e. the black economic empowerment. some investors don't understand exactly what that is going to mean in the future? is that putting off investment? >> i think what that has done is allowed space for engagement. when you put out policy proposals, those policy
proposals are intended to create space for involvement. i think we are one of those economies where that space is actually quite open and the private sector finds it useful to engage with government. and the government is engaging with all of the relevant stakeholders. it was just clarifying in my view some of those conditions and the private sector has actually taken an active roll in -- active role in engaging. anna: thank you for joining us today. nhlanhla musa nene, the south african finance minister joining us. manus: david cameron to bring forth his referendum. andy told the b. b.c.'s andrew marshall it was important to avoid long periods of uncertainty. >> i have watching how public opinion is changing. i began to see there was clearly an appetite for a
referendum. that is why i hope change comes in this election. i have said clearly and quickly that we need to bring forde that referendum. the worst of all words is a prolonged period of uncertainty and argument. manus: we have more on the weekend story. great performance yet. how significant is it that he is saying it is up to cameron and the danger is that cameron doesn't come back with something? >> it is a massive shift for labor, who tried to get elected on a platform saying we don't wanted a new referendum. this is burn ham trying to distance himself from that 2010 government. pointing out the longer we wait, the more instability there is going to be. david cameron has said himself he wants to bring it forward if he can. but there is the question.
anna: can he bring it forward? what would stop him from trying to bring it forward? >> you have to remember that he caused a lot of teppings with other e.u. leaders. as i was trying to get elected, he did campaign on a little england mat form bringing in small businesses to brussels, which went cowen at home, but didn't pleases the germans and the french. the problem now is he needs to be seen to be delivering proper reform. this is a process that takes some time. it is doubtful whether he can do that in a manner that will please his back benchers who basically won him out. mark: and which chairmen have said they want them to leave the e.u.? >> that is not a big surprise. you do have some k.u. businesses opposed to e.u.
jon: good morning and welcome to "on the move." just a few minutes away from the start of european trading. nearing the end game. as the grease banks near the end crunch, the government refuses to back down and greece is targeting a deal by friday. demand gets a boost from the removal of hoppity curves and pre-interest rate cuts since november. bhp down under. valued at $9.2 billion, below the $11.2 billion median
estimate. looking at futures dead flat on the ftse 100. let's kick off the week and get to your market open. manus: amazing how these mergers were in the last throes with greece. the dax is down 2.2% last week and athens was down over 3% last week. to that and these equity markets have a little bit of reprieve. the cost of insuring yourself from a collapse is at the highest since 2012. the most expensive relative to the united states of america since 2006. stock investor sentiment is the worst since 2014. u.k. government bonds are the second biggest negative