francine: the great fall of china continues. the shanghai composite plunges 7%. $2.7 trillion are wiped off all equities yesterday, european markets go for a rebound. ceasene: bhp village and its full-year profit plunge 52% -- bhp billiton sees its full-year profit plunge 52%. welcome to "the pulse" live in london. i am francine lacqua. manus: breaking news on the eve
of this -- , beatingclimate 108.3 estimates and expectations. and the estimate was for 102. francine: better than expected. if my calculations are right -- and they may be wrong -- part of the survey was done in the first couple days. the for the market rout -- bef ore the market rout. expecting to be lower than estimates because of the china factor. but confidence at 108.3. manus: chinese shares have plunged again. routteepest four-day since 1996. the markets europe, have rebounded. we have more on that with caroline hyde in a moment. we also have richard frost. he is in hong kong. what is behind today's rout? richard: yeah, hi.
fairly astonishing day giving the heaven losses -- the heavy losses we had. decline. what appears to have happen is after the government expended so much energy and funds to shore up the market following the rout last month, they seem to have disappeared. heavyat we've seen is losses with some of the largest companies, including petro china, china's largest company, which has long been considered a target of state rescue funds, falling by 10%. more than 700 companies felt by the 10% daily limit. we break through the 3000 level. previously, we had seen that 3500 had been the government -- had been the level the
government had been determined not to let the index fall below. having created concern before by the intervention. now there is concern about the absence of their support for the markets. it's now anybody's guess where the market goes from here. manus: speaking of one of those guesses, thinking of the japanese market, we are down just under 4% on the close. what are the issues that are? is there any chatter in terms of the bank of japan getting ready to make some moves? richard: there is speculation about that. and moree wildest day than four years in japan in terms of the intraday swings. we started the day down due to the big jump in the yen. bad news for the country's large exporter. as the yen fell heavily during the day, then rallied as much as 1.9%, i think it was, then the
those declines and we saw stocks tumble again towards the end of trade. volumes are very high. double what the 30 day average is. and volatility, again, the highest in four years. outside of shanghai was a sense of relief just like you are seeing in europe, there was no relief in japan. this is a market that has not done as badly. down 15% from its peak. some of its peers, hong kong and other markets in asia, have already entered bear markets. but definitely a tough market for japanese traders. francine: very tough. thank you very much. manus: let's take a look at what is happening across europe. caroline: we are calm after the storm and europe, at least. green across the board. thes in excess of 2% in
ftse 100, the dax. picture from yesterday. let's have a look at the stoxx 600 in terms of industry groups. yesterday, every single one was falling. today, entirely opposite. up 2.7%. we have added 200 billion euros to the market valuation so far this morning. and 300 billion euros is needed to make a for yesterday's rout. miners leading the charge, up 3%. across the board, opposite picture, as many people reassess what the fundamentals of this economy is. jpmorgan saying perhaps now is the time to buy. you've got raymond james saying local growth -- is where you should be. they are immune to the global rout. when you have profit set to rise 6% this year. ofn you have the likes
european growth said to be the highest since 2011, should you see that dax in bear market territory? a nice city view for you. the pound pretty flat against the dollar at the moment. yields at 1.85%. let's have a look at how the dax is doing. the euro coming low. fascinating that became a haven. who'd have thought it? euro coming down today. yields at 0.6%. dax is currently high. asia still not changing. 4%. japanese nikkei off by 3 the dollar rising against the yen eventually. but china is where the pain was. the storm will still be an investor's eyes when they see shanghai off by 7%. commodities. oil up 2%.
copper currently also trading higher, up 2%. that was oil. let me get you copper properly. up .3%. so, a little bit of a reprieve in commodities and the asset classes. i will show you later what the miners rae doin -- are doing. the question now is, of course, whether they are oversold in these markets. that is what bank of america and merrill lynch say. hascine: even donald trump weighed in on china posting this video on instagram. trump: i have been telling everybody for a long time china is taking our jobs, our money. be careful. they will bring us down. you have to know what you're doing. we have nobody that has a clue. francine: we just had to fit him in. manus: there is nobody who can trump that. francine: our guest joins us. quite, the set up was
something. on a serious note, how worried are you about china? $2.7 wiped off global equities. >> several things have happened in china. the first is the leverage and we saw between the 2003 and 2007 period was very much towards mining and commodities, as china was spending and growing. now we have seen a deleveraging process. commodity markets have taken quite a beating over the last fi ve years. it's just the process unraveling. now we also have a new element coming in. the market i think is pricing in is a growing level or new level of skepticism about how the chinese government and central bank is dealing with the current problem. so, that is obviously clearly putting pressure on markets,
especially the fact that the central bank is actually manipulating to a certain extent is to messick market. and i -- its domestic market. i think that is a problem that westerners, weston investors are simply not -- believing this is sustainable over the longer term. manus: do markets want to see more substantive action from pboc? the discussion i heard with mohamed el-erian last night was this was a torch paper lit by the chinese and it is burning out of control. it is up to them. guy: there are two things again, here. got an authority that is supporting a market that is already expensive. that is already too expensive and not actually properly priced. compared with what the
expectations are going to be for the chinese economy. so, that is unhealthy in the first place. the second issue is that we are not so sure that the chinese government understands or know what are the tools available to actually tackle this problem. we know what the problem is. we hope that central banks will talk to each other and give good advice to each other to tackle this problem. that is why we are not that concerned. francine: do we really know what the problem is? that thist worried could be a global recession because there is a hard landing? guy: it will be a lot bigger if nothing is being done, of course. but we have to look what has happened over the last 10 years. we had a global growth scare in 2011, that was very much driven by the u.s. we tackled it. we had a european growth screa are in 2012. we tackled it. we have a 2015 emerging markets
growth scare. we are looking at it, hopefully we will tackle it. there is no reason today to be scared that something much bigger is hiding around the corner. so far it looks like it is just the market -- that is now coming down. it is a result of unraveling commodity prices going up too much on high-growth during the last 10 years. and slower growth coming into these next two years. manus: thank you for your opening salvo. he stays with us. which brings us nicely to our twitter question. francine: we should have asked him. should we ask and quickly? a cheeky twitter question. hike? q.e.4 or u.s. rate guy: the market is clearly asking for q.e. 4. this year looks unlikely.
i know some investment banks are already forecasting spring 2016. manus: i like the way you say the markets are asking for q.e. 4. francine: thank you so much. we are coming back to you in a couple minutes and we will be talking commodity prices. here is look at what else is on our radar. zurich'ss after proposed buying the company. u.k. regulators have given zurich until september 22 to make a firm offer. manus: monsanto has made a takeover offer for syngenta. after an earlier approach was rejected. the new offer is 470 swiss francs per share. francine: the standoff on the korean peninsula is over for the time being. after marathon talks, the north agreed to lift it state of war in the south said it would stop broadcasting propaganda across
the border sprint manus: alibaba shares have fallen below their ipo price. it dropped below its september of $68.e alibaba has lost $120 billion of market cap. francine: if he still have spare change after the global market rout, a car app is looking to raise $100 million in china. according to an offer sheet, investors willing to put in a minimum of $470,000. and could see returns as high as 109%. manus: as commodity prices tumble, concern over the slower growth in china rises, the global mining meltdown gets worse. this morning bhp billiton reported slumping profits. for more,'s let's cross over to carolina get the details on the numbers. caroline: pretty phenomenal if
you're digging into the numbers. and the pain that is being felt in terms of profits. let's start with bhp billiton. profit worse than expected, down 52%. sales slumping 22%. this is a company focusing on four areas. oil and gas, iron ore, copper and coal. production is falling and most of them apart from iron ore. volatility is here to stay, particularly in china. so says the chief executive. they are doing ongoing economic reforms and china. this is going to contribute to volatility, so says andrew mccutchen -- but rays of light. second half coming he says china is going to be better. ivanber last week when glasson burke said he could not read was happening in china. said he couldberg not read what was happening in
china. angie mckenzie says it is not impossible to read. andrew mckenzie says it is not impossible to read. emerging markets, they will continue to organize. they feel that the long-term priorities are indeed there. so, what do they do a mitts this volatility and this -- amidst this volatility and this rout? they are focusing on cost cutting. squeezing the lemon is what an drew mckenzie calls it. but i think that is what sending the shares up the most since we have seen in february. the biggest move since february is because they are committed to progressive dividends. dividend yields at a percent. and they say they stand by that. what a relief. -- dividend yields at 8%. let's take a look at a big copper player.
profit down 49%. sales down by 30%. we saw bhp billiton slashing its 7.3%. its shares trading high. medium to longer term prices will recover. they are trying to sound optimistic about the future. are saying, yes, there are current challenges, but also opportunities. could we see a little bit of m&a? that is what they chief executive of bhp also saying. francine: thank you so much. the very latest on some of these miners. be sure to stay tuned to bloomberg. we will speak to the ceo of bhp billiton at 2:30 u.k. time. manus: guy is still with us. ivan glasson burke said that he could not read china. glasenberg said he could
not read china. it has been flat. guy: i busily, it is a result of a general lack of demand on a global basis. and on the other side too much supply. so when the commodity goes up, they will post excess profits. when it goes down, they cannot avoid it. it is the only products they have in the banks. suppose, the idea now is to try to understand what's in there for investors. are they patient enough to wait for the upturn? in the meantime, as they wait to get the dividends. francine: is it something that you are interested in? this is a restructuring story. if you do not think that we are looking at a global recession and dividends are there, is it worth buying? guy: if they are reached being
more back to shareholders as the slowdown continues, then it could be quite interesting. if they could be well-placed and time the recovery well, of course it is a cheap stock. manus: and everybody hopes for that. and if you get it, then great. you mentioned the word dividends there. and this was part of the debate. they are holding on with their fingernails some of these companies to reassure investors dividend is there. don't worry. but the reality of it is that they may need to shore themselves up. are you so confident on the dividend stream? guy: for global companies, it is because asia it presenting -- has been growing part of their earnings. but if you look at more domestic-centric companies, take banks where dividend growth stories are abundant. lloyds in the u.k.
or ubs for most of europe. and the u.s., even bank of america or citigroup. these are companies that are sitting on excess capital and planning to redistribute a growing part of their earnings back to shareholders. so these are decent stories that are in some ways immune to the rout we are saying at the moment. francine: what is a perfect timing to buy these? do you do it now and hope for the best? guy: in terms of dividend growth stories, you will certainly find some interesting ones in europe, in the u.s. and the insurance and banking sector. in terms of timing, banks in japan are relatively cheap compared to markets. it is the same for the u.s. it is the same in europe. still unloved's by investors.
the it certainly reduces probability if this volatility continues, which it will, then the fed will be cautious. uchammed: in s circumstances it will wait and not initiate interest rate cycle in september. francine: that was mohamed el-erian with his thoughts on how market volatility will influence the fed's rate rise decision. manus: let's bring in guy de blonay from jupiter. sane, sensible words from mohamed el-erian. do you see any possibility -- touched on earlier -- the fed would move? are they going to have to do more stimulus? is it up to them to save the day? guy: it is clear that the market
lowow pressing in -- very probability that any rate hike could come this year, even in december. and most likely something will come within the first half of next year. the idea here is that if they do basis point is september or december, it will be a symbolic move. then perhaps nothing for a year or two. depending on the data and the global macro -- as i said earlier, central banks need to talk to each other. china needs to push for quite a forceful stimulus going into the end of this year into next year. without that type of scenario, it will be difficult for the fed to do anything this year. francine: back to the pboc,
something that has been troubling me. you say they should be doing more. at the same time, they are trying to understand the floor on the free market? is it because they are getting the policy wrong or because they are taking too much risk? guy: it is clearly a new environment for them. i'm not saying that they are overwhelmed by the situation, but i suppose that they are probably not doing enough and probably not being open enough aroundr central banks the world to discuss in concert what has to be done. this will change. it has to change. but the bottom line is that they have to cut interest rates. in a dramatic way. they have to make sure their currency does not slip out of control as well. they have to stabilize the world financial markets. so, i think there are things to be done in a careful way, and the result and the consequence of that, we need a rebuild of
confidence, of credibility for that central-bank. manus: we have written a story on the terminal that says that analysts and china are getting ready on the ascension that yuan were traded seven or eight by the end of next year. would that be policy out of control? it is not the right policy lever, is it? guy: it remains to be seen if it is the wrong policy or not. but what is going to create is a competitive variation in the rest of asia. and that obviously is not -- is not something that we are wishing for, simple because interest rates may have to go up in emerging markets. that will slow growth even more. and the selloff will continue because markets, emerging markets or valuations and emerging markets have gone up over the last six years as a result of growth expectations. so sadly we have to revise growth dramatically in emerging markets, because they have to raise rates -- suddenly, then
francine: welcome back to "the pulse" live in london. i am francine lacqua. our top headlines on bloomberg. european equities are bouncing back this morning. pushing shares up after yesterday's $2.7 trillion global selloff. on concern that the government is abandoned market support measures. the shanghai composite ended the day down 7.6%. francine: meanwhile, the federal reserve bank of atlanta
president dennis lockhart says he expects the first interest rate hike in nearly a decade to come this year. a stronger dollar and a weaker n comput take growth and he told bloomberg that september remains a real possibility. $2.7s: yesterday saw a trillion wipeout. some of today's guest try to make sense of this. >> i would not be a buyer today. >> this is a short-term, painful correction. >> i think people had a hard time sleeping last night. >> a vertical down like this is just, it is not something you want to step in front of. >> usually, it occurs at the end of a bear market. they have -- this has occurred at the beginning. this is a signal that something is very wrong pet >. >> the fundamentals to not wore
this. these rapid moves in prices are not matched by changes in underlying intrinsic value of the businesses. >> the central banks for seven years have been pumping up asset and equity values. you keep pushing of them up high enough until they get into thin air, they are bound to correct . >> no correction is healthy? >> there is such a thing as mean reversion. we have not had a corrections as 12. we were due for one. >> it is the kind of thing the markets go through. >> unless you believe the chinese economy is so bad that global economye into recession, then i do not think it is likely we will see a 20% correction on the s&p 500. >> given the rate of change of price, interested value, it is more of a buying opportunity for us that anything else. >> the people that say they will buy, i just wonder whether they still have money, or they have to use leverage. >> you want to bind to companies
with big balance sheets. second, you need well-managed added -- industries. in you need to be in a forward looking industry. active investors will get excited once the smoke settles that there is a lot of value being created. and more value being created over the next few days. francine: a lot of nervousness yesterday. we have a bloomberg school. according to people from the labor the situation, china has halted intervention in the stock amiliar with the situation, china has halted intervention in the stock market. manus: if you think what they have already done. they decrease the yuan. amountve thrown a huge of this equity market trying to get retail investors flushed out. are they completely wiped out of the china market? hence, the reason why they want
to pull back on stimulus. francine: trying to figure out whether it is worth a. whether there is a correlation between the real economy and what is happening on the shanghai composite. now, on to germany. manus: a reported rise of business confidence. this despite the fears about the china slowdown. impact europe's biggest economy. let's get straight to our reporter in berlin. hans nichols is stopping by. break this down. it has a funny sense of timing. hans: it's real time. and these are august numbers. german business executives are looking through the negativity happening in china and they are still confident, confident about their ability to continue to create value. last month we saw something similar where they looked through greece. this month they are looking to china. we had a surprise on the upside. expectation was for 107.6. came in slightly better at 108
.3 there is a lot of concern about china. but in some ways it is only 6.6% of german export. if you what the trade deficit has done between germany and , it was at the lowest it had been. this year it is creeping back up chinese demand drop and you have not seen much chinese demand for a european, german goods. that has been a cute in the auto sector, because we have seen bmw revise. for sadie's last month sold more vehicles in china. last month sold more vehicles in china. all three auto companies in germany seem to be weathering. bmw up 5.8%. audi, which does have china's exposure, is still resilient. that is an indication that the export driven economy is in decent shape.
the fundamentals are strong. and there is not to be a reason to be concerned. efo seems to be bolstering of you. of gdp, theyterms are so reliant on exports. this is going to have an effect as the months go on. hans: this is why i am slightly confused about the efo number. we have the auto and the efo numbers and then you take a look at second quarter gdp figures. 2.2% of growth was export related. so, clearly, exports continue to drive the economy here. it is the third quarter where we saw a lot of negativity in greece in july. in august, the china story. if that affects the export story, then we could have some negative numbers in the third quarter when we get those. again, it seems like if we believe that efo is a good barometer, and most economists in germany trust that number. it is telling us the german
economy is resilient and should not be concerned about greece last month or china this month. francine: thank you so much. hans nichols in berlin with the latest on the german economy. manus: let's switch our attention to south africa. they are set to release second-quarter gdp data. this is a day after that rand tumbled to a record low. stocks sank. concerns over the plunging commodity prices with china as its top export destination. francine: what lies ahead for africa's most industrialized economy? we are joined from hattiesburg. what -- joins us from johannesburg. >> hi there. well, are expecting a number of growth to print for the second quarter. that would be the lowest case of expansion since the same three months a year ago. and it just underlines the trouble that president jacob zuma's administration is having
an reigniting growth in south africa's economy. almost everyouts second day is holding back manufacturers. the currency is down 44% this year already. and still, we are not seeing any rebound in manufacturing. therein lies the conundrum. if the rand's decline is not helping manufacturing, what effect is it having on the economy? vernon: exactly. that is exactly what the conundrum is. weak currency. and it could not come at a worse time for the south african economy because interest rates -- interest rates bets are going up. that'll put rates at their highest level since 2010. it's something that consumers can ill afford and companies that are struggling with higher costs, higher labor productivity and high -- as i mentioned --
are reallycosts struggling. it would need some kind of effort from the government to get growth ignited in the economy. francine: thank you so much. manus: now, the commodity crunch and concern over china is pervasive. it has had the world's biggest mining company. the hp bulletin reported that full-year profit flood -- lliton reportedbi that full-year profit market plunged 52%. wow. what a rout. is it symptomatic of a correction? can you call it bottom? there is a lot going on here. tough for the mining companies. is is the bo -- is it the bottom? who knows? metal prices did very well yesterday.
by the end of the day they were up. what that says is fundamentally not much is really changing and china. ok, we know that china hit a wall in terms of instruction growth -- infrastructure and development. that happened in the first quarter. that is when we first heard about the stalling of sales of construction machinery into china. it seems to be taking time for it to feed through into all of and people's recognition. of course, the government has not pulled the nation out of that sort of stalling just yet. we are expecting it. we expect the government to do something to stimulate manufacturing industry, construction industry, but so far the growth is more in services than anything. these are tough times. if we look at bhp's numbers, they are going to be really hit by the continuing fall in oil prices, copper recently. what that means is that margins
have been very good, actually. they have held 50% eibtda -- ebitda margin. they have done that through jettisoning lower margin businesses. and some brutal cost-cutting. th.billion wor and there is more to come. but it is still going to be tough. earnings of 4 billion pounds probably going to fall to 3, 2.5 going forward. if we look forward, normally the stock market looks 6 months forward, then we should start to see these stocks coming out. i'm thinking, when do i buy glencore or rio tinto? not sure i want to buy into bhp now. one should be looking for an opportunity to buy. and probably you choose august where we are now or wait until october which is a wobbly month for markets. manus: are you going to have to
whether a little bit of near turn -- near term pain? miners, do you pick -- you have to take a longer-term view. or are the dividends secure? john: good question. they have increase the dividend. bhp have a progressive dividend policy. i would be worried with glencore. manus: how long is that progressive and can they hold it? john: they have cut back on capex. they need to spend more there. so probably they can, considering that very stable margin may have got. so, as much as prices come down, that is -- good at cutting their costs, it is petroleum division that worries us. i think they will continue to do reasonably well in copper and iron ore, although we have seen pullbacks in those prices. bhp is not my favorite of the bunch right now. francine: you are waiting for an
opportunity to go into glencore. david harrow made that call. he has 4.5% of the stock and then it tanked. get into alt if you company like glencore and you rely on dividends, do you have to ignore the share price and say that you are in it for three years? john: if you want stable dividends, by something like shell. and even they might be under threat. no, you are not going to buy this for income. you're looking for appreciation. the thing is the world has not collapsed on us. smooth growth in the u.s. and the u.k. eurozone is not as disaster -- a disaster. how will china emerge from the stall? the statement from bhp is there is longer-term growth there. manus: bhp billiton signals from china are more mixed.
a quick closer. it'ss skew -- metals says vandalism in iron ore. the industry is not helping themselves. john: no, but they are trying to squeeze out the higher cost producers. francine: thank you so much. manus: up next, asia's richest $3.7 billion. we take a look at black monday. the biggest losers after the break. ♪
welcome back to "the pulse." now, here are some of our top headlines. manus: there is good news for lanes of people in london. in two 24 hour tube strikes have been called off. the union suspended the walkouts in a gesture of goodwill. the workers are in dispute with the tube operator over plans to introduce a new night service . night service last month. francine: if you have some spare change after this global market rout, call uber.
according to an offer sheet, investors willing to put in a minimum of $470,000 and could see returns as high as 109%. manus: cutting diamond prices after an attempt at reducing supplies failed to increased demand. the world's biggest diamond producer has dropped by 9%. it cuts full year production targets. francine: the market rout has hit asian billionaires the most. as china's stock market saw the biggest plunge since 2007. manus: now, bloomberg billionaire reporter devon pendleton joins us. devon, i mean, this is just a huge number. what was behind it? devon: it is what we have been talking about all morning is the market rout. many of these billionaires have a lot tied up in public markets. that is a huge wipeout in their wealth.
francine: how do they compare to losses in the rest of asia? the chairman and founder -- they have department stores and tourism and real estate. they have entertainment centers. was spared.ctor he had a giant lost because he is the wealthiest. but across all of asia, you see a significant amount of losses. it's a total departure from what we saw in the beginning of the year. beginning of the year, it was a total billionaire factory in asia. 50 brand-new billionaires were minted in the first half of the year. all those gains completely wiped out. manus: if he was trounced for $3.6 billion. this is what blows my mind. that is the kind of number that gets you on to the bloomberg list. who else is taking pain, apart from the obvious once we have talked about? he's lostlos slim, $14 billion.
that is beyond staggering. in the top 200 wealthiest people. secondtega, the world richest man. he also had a rough time. he is very wealthy. a lot of skin in the game. these total dollar losses are staggering. francine: this is because they own shares? is this future earnings we are calculating? devon: you are looking -- mostly at shares of companies. but we also look at billionaires that have public, closely held companies as well. they are seeing dramatic drops. how we value those companies is how we look at publicly traded peers. devon, let's see what the rest of this we called in terms of billionaire risk. francine: up next, from playing sherlock holmes two alan tur -- to alan turring, it has been
francine: no. with advanced seats selling of a year before the curtain raises -- for playing sherlock holmes, cumberbatch has had a remarkable for years. manus: here is what you need to know about the man of the moment. eporter: playing hamlet is a right of passage. the man playing him has quickly risen to the top selling out 100,000 tickets in minutes. oscar nominated for his part filmsof alan turring his are turning into money spinner spirit he has been in 21 feature films, but together they have billion at the box office. he is also fast become one of the most popular actors of his generation. a fan site claims to land 200, 000 visitors every month. while his roles in hollywood are cementing his place, he's done
well in the bbc series sherlock and 2010. >> that is the trouble with dismembered country squares. -- squires. million viewers tuned in to the return of the series last year. his appeal is so vast that fans have made a japanese manga v ersion of his character. francine: took him a while to become famous. manus: slow burning. -- burner. francine: a second hours coming up. we will continue our discussion on the china rout. its impact on other emerging markets. we have hans gunter -- from morgan stanley. manus: talking about expanding. we'll talk about that. join us on twitter. in the meantime, let's have a look at the equity markets. to be have a look at the twitter question? francine: we have had a great
response. what comes first qe4 or a u.s. rate hike? you can tweet us. this is what we are seeing in terms of equity markets. in europe, we had a reversal. trillion wiped off markets yesterday. today, europe is up. shanghai is down 7.6%. is guest -- our guest worried that they are not going to do enough to stop this. manus: it is about the confidence and what policy lever they enact. bank of america and merrill lynch say that markets were oversold and you need a central-bank trigger. sharp falling's a knife. we understand,, according to people familiar with the situation, has halted intervention in the stock market. they say too expensive. is it worth it?
a warm welcome to those waking up in the united states. francine: i'm francine lacqua. it is a better day today than yesterday. manus: chinese shares plunged again, extending their steepest four-day route since 1996 on concern the government may pare back market support. francine: here in europe, the markets have rebounded from yesterday's so-called black monday. let's get to beijing and our bureau chief. nick, what is going on? >> well, what we know now is that we are hearing from sources inside china that the government has indeed decided to cut back intervention in the market for now. basically there is a feeling or a debate going on that intervention was providing -- proving too costly and also the market itself, the downturn, maybe there was a feeling that it wasn't necessarily going to have a broader impact on the economy.
if you look at the market performance in recent weeks what you would have seen is a sort of drop during the day and right in the last few minute or last hour or so of trading the market would surge back up. that was the intervention happening. we haven't seen that happening now. it does now peer that the government is going to let the market go its course and perhaps go as low as it needs to go. manus: in terms of how long can the government actually -- that is the question. we have these reports this morning that the government may step back from supporting the equity market. they have thrown so much at these markets. would this not be a big u turn? what is the thinking? >> you know, there is a credibility issue here. when the market was on the way up, the government was saying, hey, 4,000, it is it is not teen start of the bull market. we're encouraging people to jump in and the market was seen as part of a broader government
plan. so companies that were raising a lot of debt don't take on debt, but get into the market to raise capital. if the market does continue to fall and really keep going, if you look at the last 12 months, it is still up over 12 month fwuss government will face the test where people start to say you were telling to get into the market. now you're not. saving us as the market plunges. it is expected that the government will need to take some measures. we're just waiting to see what those will be. francine: japan's nikkei not reacting well to china. >> well, you know, i think what you're seeing there is a fear of contagion from china but also some of the stocks that ere falling in japan, shippers and warehouses, these are companies that depend on china for their livelihood and the larger picture, the economic fundamentals in china are still quite poor so exports were down
and industrial production down. so i think you're seeing a sort of spillover there to have broader economic fundamentals in china that have been so bad in the couple of weeks. francine: nick, thank you so much. nick beijing. manus: let's take a look at the rest of europe. caroline hyde has the latest. how are we looking? caroline: what a difference a day makes. yesterday, the storm from china lobbed us here in europe. today we're sheltered from it. the outperformer, interestingly greece up more than 5% at the moment. tentative buying. appetite for risk once again. we're seeing on an industry basis the stoxx 600 currently up 2.8% and every single industry group is outperforming, basic material, miners f course the leading the group higher. a complete about face.
today we added about 250 billion euros. we are halfway. we have to add another 250 billion if you're going to make up from yesterday's route. the u.k., ftse up 2.3%. as you'll see we're pretty flat in the pound versus the dollar. i want to check in on germany of course. yesterday the dax entering bear market territory. 10% lower than the previous highs of the year. today we're seeing the euro suddenly take into play with germany. this is something that has become believe it or not the haven rather than the swiss franc or the dollar torian. money was moving into the euro to shelter from the chinese storm. interesting. recalibrating a little bit. the your c.e.o. onlying down versus the dollar. nikkei down some 4%.
of course this is where traders are going to be focused on. shanghai still off by more than 7%. will we see those cold winds blowing our way once again tomorrow? what's happening is people are going to have the fundamentals changed? jpmorgan morgan saying this is the time to buy. does this really mean you should be selling off the dax to such an extent that you're in a bear market? should we really be eradicate all gains? profits set to grow. euros on the lower side. i want to show you commodities quickly. we're seeing a bit of a bounce back there. sure they are coming off significant lows. $39 when you look at w.t.i. crude in the u.s. copper up -- retracing our steps are now down .1%. i want to show you quickly a couple to keep an eye on. we got the numbers out of
b.h.p. billiton. they of course have driven that particular stock up higher. up 5%. praft is more than hall fed. they are standing by that dividend. than halfed. manus: the question is whether these gains will sustain. francine: on to other news, even donald trump, the man, the donald has weighed in on china posting this video on instagram. >> i've been telling people for a long time, china is taking our jobs, taking our money. be careful. they will bring us down. you have to know what they are doing. we have nobody who has a clue. we have a guest host. i'm not sure how we ask him if you should mod it will bryce of the dollar? manus: let's go to china first of all.
hans, very welcome. good to see you. policy levers from china. what should they do? will that freak us out even more? >> they are not trying to keep -- the stocks will if the u.s. dollar continues to rally of course that may be expressed in a higher rate. message number one. message number two, when you have developments like this, there will be a policy response. the is what policy response are we going to see cut off interest rates. that's what we're forecasting. adding liquidity into the market system. when this materializes you should expect a positive reaction on the back of that. and then of course you asked me what should they do? what should they do? when you do monetary policy on
its own you need to -- secondly you may as well -- that risk with market oriented reform. francine: hans, you seem to be taking it as a given how they will react. according to people familiar with the situation that china is now having a question on whether they can afford to stop the market route or whether they should just leave it because it is so distant to real economy, that it is not really their problem. this has huge implications if for the rest of the world. >> hans: absolutely. what you referring to is the intervention in equity market. francine: right. that will have an impact at the end of the day. hans: when you provide support in the equity market or interventions, the participants are going to ask what is going to happen? therefore i think the market is never going to find a natural
equilibrium under the circumstances. now it seems to be happening. what we are talking about is the response to that. the response is to cut reserve retirements and cut interest rates and go fiscally ahead. structural reform. to make it a market-oriented economy in a better sense. we have seen when there was reform efforts, remember late 2013, there was a reform effort and how positively the market -- in first quarter, 2014. that would be a really good step to see. of course the market is in a wait and see situation. currently volatility is extremely high. markets are. there are things that will have huge market moves in the foreseeable future. i think we have seen these situations before in all of
these situations that we did see after some time are counting downfect. look at our -- we are looking into the equity market and we look at five indicators and we have full house buying opportunity according to shows indicators. this indicator always used to be successful. ere was only one casor doing situation in the -- when you have rebound and follow a bigger decline. but otherwise it really showed us a very important turningpoint and we have a full house situation at the moment. that makes our equity guys confident. manus: great. hans, you're going to stay with us. he is the fx morgan stanley fx team. francine: what comes first? q.e. 4 or a u.s. rate hike?
manus: let's get up to speed now with what else is on our radar this morning. zurich's conditional offer of 5.6 pounds a share about billion pounds. they have given them until september 22 to make an offer. francine: the standoff on the korean peninsula is over at least for the time being. the north agreed to lift its state of war and the south said it would halt broadcasting propaganda across their mutual border. manus: alibaba the i.p.o. price for the first time. dropping below its september price, $68. surging to a high of $1189 ra share last november. they have -- $119 a share last november. francine: the car booking
company uber is looking to raise at least $100 million in china according to an offer seen by bloomberg. investors waiting to put in a minimum or $400,000. manus: pakistan's rupee has sunk to the weaks level since march 2014. the nation became the latest to devalue its currency. one person who has view is morgan stanley's -- hans who is still with us. my question is we have seen some significant moves. the yuan depreciating. obviously that has spilled other into near asia. my question to you is the route done or do you fear that we're at a moment of reprieve? hans: what you have to think about is what has been the course for the currency decline. you look into an environment where you have high debt
levels, corporate debt levels. the capacity -- the result $48% of g.d.p. in some countries have been -- for investment purposes. when you have overinvested your returns, so the question is where is the return of investment? if the return of investment is negative then actually you can cut interest rates as much as you want. you only reduce the pace of deleveraging but you are not getting a pick-up in investment. it is about where is the return of investment in these countries? the monetary e, response in the vetion going to come. i was talking about the people's bank of china, the reserve requirement cut. you have to think about in a more broader context in asia, they have to ease monetarily. that actually means that the interest rate ditch rbles are going to turn against cups in the region and that means that
-- it is going to weaken and what we have seen so far i guess is we are in the middle of a move. there are potentially more to come. there is not going to be a volatile -- like in 1996. there was a -- investment activity in the region which was funded by people abroad and people abroad where -- providing dollars into the region. it was a local investor that was taking the risk. . what you have now is investors from western entities, especially the united states were buying into local capital markets when you into our flow indicator, where the money come interests into investment in asia or latin america is mainly from the united states. and this money went into bonds and equities. we have now a situation there are about eight country where is you you have the foreign holding in the local market being bigger than 20%.
under those circumstances, let's say, the u.s. economy does continue to do -- because of the output, going to hike rates, and the premium in the u.s. bond market chs exceptionally low means than if by the e hike fed if it curse is going to increase the bond yields. that actually means it is going to increase the attractiveness of the bond market relative to other people's bond markets but there you have the investment of more than 20%. that actually means this money could be withdrawn and that is not going to be -- this is basically happening over time. as this very often, this a mple -- you throw progress in into boiling water, it jumps out. if you have cold water and heat it up and cook it, then the frog is going to die. francine: the best play? hans: we have actually provided
that strategy about four weeks ago. we said that is the euro/dollar should go to 1.70. maybe it goes higher than that. we basically said that the euro has been used for funding purposes and when the -- does devalue you close the entire trade. you don't need funds anymore. there is euro buying taking place. at the same time, you have the current accounts up. which is rising. it is driven by trade. that means there is commercial need to buy -- and for the euro to come under selling pressure again you need to have long-term capital outflows. you need to have the -- as a funding tool. none of that is at the moment there. francine: thank you so much. hans stays with us. manus: let's get across to caroline on the touch screen for an update on the markets. caroline: i'm looking at some of the earnings we have seen coming fast today. b.h.p. billiton. they have given us a little
bitor a light into what on earth the pain is going through these companies amid the route, b.h.p. billiton, the biggest commodity company, biggest miner. let's look on how they -- because pretty pourly. earnings down. sales rocked by 22%. the near term volatility not . ing anywhere we're seeing volatility ontinue particularly in china. china is articulating their forward strategy pretty well and therefore looking optimistic. confident on the long-term outlook for commodities. particularly in the emerging markets. said china in the second half will get better. sure volatility will be hit by an ongoing economic reform but
there are better things to come. hat now in the continued route? they are squeezing the lemon is what andrew referred it to . it is to prestarve dividend and they did. we saw the dividend come in where it had been expected therefore we are seeing the shares rise the most since february for b.h.p. billiton despite profit up by half. clearly we are seeing that focus on the shareholder helping . meanwhile, it is a similar picture being paint pd. sales down by 1/3. dividend, though, a different about the being taken. slashing it. down half of where many were expecting it. they thought it would be 6%. in fact it is 3.1%. no preservation by the hareholders there. saying the long-term prices,
they will recover. in this challenging market environment, there are some opportunities as well as the challenges. hinting at are potential m&a. just paying lip service to potential opportunities to come. francine: thank you. be sure to stay tuned to bloomberg. we will be speaking to the c.e.o. of b.h.p. billiton at 2:30 p.m. u.k. time. manus: up next how will the recent market volatility affect the fed's rate rise decisions? is septs dead? is 2015 dead? that part of the discussion coming up next snote.
>> it certainly reduces the ponlte responsibility significantly and understandbly so. if this volatility continues, which it will, then the fed will be very --. in such circumstances it will most likely wait and not initiate the cycle in september. manus: that was chief economic advisor at allianz. francine: let's bring in hans. first of all is a rate hike now off the the table? hans: if you're saying
generally, no. francine: this year. hans: it would be december. recent developments were not that surprising to us. the market is now pricing in a 50/50 chance for september. it is now pricing in the full ate hike by april. we have seen a significant shift in the rate hike expectations. the reason why we are reluctant to call for september, when you have expectations of higher interest rates, it is going to work like a magnet for international capital in dollar terms. that means the trade rate of the u.s. dollar shot up. when you look into the broad index of the u.s. dollar, that looks very different. that's why you have dollar, brazil, merging market. all of those currencies have devalued and those flows have gone into the u.s. dollar at a
trade rate has moved up. the fed has to take that into consideration. it has to take notice that global trade is weak. it had to take notice that its own manufacturing sector is weakening. the fed may be these days much more international than people think. i would say yes, the fed has become more international and they consider this type of development and therefore, yes, they are going hike but it will be measured. it will be well communicated into the market. when you look at they were promoting september. it didn't sound like september anymore. it sounds closer to our own expectation. manus: the definition of the ext three months comes down to what stanley fischer says at jackson hole. inflation is not a problem for them. hans: it is not a problem. output, the -- the
growth potential in the united states is something like 1.6. that means that it is pretty close at closeding the output gap. under those circumstances you need to normalize interest rates. when you have declining growth potential in the economy, of course the interest rate level, the material nall rate level is not going to be as high as under normal circumstances that we had five, seven, eight years ago when the u.s. economy had to grow at the potential of 3.5%. it tells you that the fed needs to act but in very moderate steps, slightly at increasing rates. francine: hans, thank you so much for that. our guest host for the first 30 minutes of our second hour of "the pulse." manus: let's flash up that question of the die. what comes first? we just heard from hans at morgan stanley.
francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. manus: i'm manus cranny. we're just getting breaking news from south africa. year-on-year, francine, in the second quarter. we know the problem within south africa. on an annualized basis we have a negative number. negative 1.3%. francine: very reliant on commodities and also relying on china. we'll have the full breakdown of this g.d.p. figure with our reporter on the ground shortly. meantime here are bloomberg's other top headlines.
china has halted intervention over the stock market this week according to people familiar with the situation. they are debating the merritts of the government campaign to prop up share prices. officials argue that the costs of supporting the market are too high according to a source. manus: the selloff on the cree ian peninsula is -- standoff is over, at least for the time being. the north has agreed to lift its semistagor war and the south has said it would halt broadcasting propaganda across the mutual border. francine: they still expect the first interest rate hike in a decade to come this year. he said the outlook for growth is complicated. september remains a live possibility. manus: let's check in on the markets. up and running for 2 1/2 hours. caroline is at the touch
screen. just holding on to gains in the european eakities space. -- equities space. caroline: what a difference a day makes. we're still only halfway back to making up the losses of yesterday. yesterday of course the storm brewing in china. ran through europe and smashed over half a trillion euros from the evaluations from these particular stocks. today, as i say, we're clinging back. shelter frerg the storm. still on in china. the dax currently up to 2.8%. the cac up 3%. we really are accelerating the gains here in europe. let's have a look at what's happening in terms of the industry group. again, complete polar opposite to what we saw yesterday. yesterday the miners crushed. we saw every industry group in the red. the today it is a sea of green. miners up more than 4% even
after b.h.p. billiton announced the profits halfed. it seems to be optimism drive forward at the moment in terms of risk appetite. morgan stanley saying it is time to start buying. look at the earnings. we're expecting 6% growth in profits across europe. should we really be in a bear market? we're seeing the ftse up. .10%. nd up just about check out on germany. entering a bear market. 20% off the previous highs in the year. today dax up more than 3%. let's have a look at what's happening in euro. because we are starting to see euro trading lower. remember, this has been a haven, a haven, the euro, even amid greek instability. it outperformed the likes of the pound, the dollar, the yen. check where it has been in the
past week. we're up almost 5%. it is deemed to be the place to put your money. now we start to see a bit of a turnaround. we are seeing the euro track lower. we're seeing a turnaround also in oil. oil up 3% now. of course we're still at a very low base. 39.42. we're seeing a bit of a reprieve in oil. we'll have a look at how copper is faring. up about .3%. still, the mining numbers coming in very poorly from some of those companies. today looking on the brighter side, while the turmoil still heads over in china. back to you. manus: leave it up to you to mind the ray of sunshine. let's turn our attention now to south africa. we just have broken the second quarter. growth numbers fell by 1.3%. this is after the rand tumbled
to a record low. vernon, i mean rning this is a contraction. i can already hear the headlines being typed which is are we on the way to a recession? is that what we're going to hear? >> well, this is the worst quarter since the first three months of 2014 and there is broad based losses across many of the industries. we had trade declining. mining, agricultural. they all went into negative territory. economists were looking for 1.6% growth in the quarter. it spells a bit of doom and puts the government's growth target into doubt. francine: what is having an impact on the commodities? is it the commodity prices? >> it is the combination effect
hitting south africa's economy at the moment. we have a power crisis at the moment. companies cannot really expand operations. without electricity they cannot deliver, they cannot up the output. the currencies plunged about 40% over the last five years is not really helping them because of wage demands which are higher than inflation and also as you mentioned, a falling commodity prices. there is also a lot of policy flip-flops on trade in particular that has been criticized. a lack of implementation, many saw it is a panacea in south africa's economy. manus: thank you for running up those numbers. francine: germany's i.f.o. .nstitute has reported a rise china of course is germany's biggest none.u. trade partner. let's get more from hans
nichols. what do you make of the fact that i.f.o. better than expected? g.d.p. not so. hans: g.d.p. came in at what we expected it to be. paltry. 0.4% growth. that was the revised reading. the i.f.o. numbers surprised. it has been for 107.6. we had a surprise in july as well. it seems like people are looking through china just as last month they looked through greece. now question is how strong are exports? what role do exports have in all of this and how much concern is there with china? if you take a look at exports, in 2014, that trade deficit went into an all-time low in part because the germans were exporting. that chinese consumer was ,.ying
that has changed this year. clearly the deficit is increasing and we'll see whether or not there is going to be any sort of cushion elsewhere in the globe. we have seen a cushion in the auto industry. right? you have all the luxury auto companies really making a push in china. mercedes has had better sales in july than expected. there have been some warnings from audi and b.m.w. that that won't quite be there. when you look at the luxury sales, this is what is driving the german economy. mercedes up. b.m.w. is up and audi is staying neutral. as long as these exporters continue the have growth, the german economy and confidence will be strong. manus: we have had the growth numbers a little bit earlier from germany. china is their number three trading partner. hans: yes. manus: are these storing up issues for the second half? we really haven't seen the hit yet? hans: could be, right? you look at the 0.4% increase
from the g.d.p. 2.2% of that was export related. if exports do fall off, you won't see a pickup in private con sugssungs in -- consumption. when you look behind the number s of what is in the g.d.p. , if it is all export growth, the only positive sign for the third quarter is the if personal consumption picks up. personal consumption could pick up in the third quarter a, because german consumers are going to feel a little richer with the commodity prices declining and the price of oil and benzene down and then b because of the general confident that we seem to see in the business community. maybe you can see a way to the german consumer will have strong third quarter figures but in the past relying on the german consumer for economic growth, they are always out there bargain hunting and not exactly a tried and true strategy.
equities since august 11. could the fed hold off its first interest rate since 2006? that question will be on everyone's mind at the economic symposium in jackson hole later this week. we're joined by economist david owen. first rate hike, this year or not? >> well, my colleagues in u.s., are saying december. it has been going for two years. they made that call that the first rate rise would be in december this year. obviously recent events push that time into 2016. but yeah, it is going to come later. manus: one of the discussions we have had over the past hour and a half has been policy response from china. what might be the most appropriate -- what will have the most impact in quelling what has been a blood bath in equities and a slamming of confidence. in your mind what policy response will we see? >> they could even do q.e.
themselves. further rate cuts. manus: what would the chinese q.e. -- >> could they buy equities? it obviously has been discussed in countries outside china. basically cut rates and get the currency down. obviously they have to rebalance their economy. it is not clear at the moment how fast china is slowing. francine: if they cut rates, they are concerned about outflows which is why they have been hold offing it is a ing act. are you comfortable that they will pick the right act? >> no. absolutely not. but we don't know what is going on in china really anyway. sort of what we do know is that world trade has been weak since the crisis. it is no surprise that the world trade is not great at all. the markets are more focused on weakness out of asia.
that is coming through in the stock markets. the markets are now rallied some more. the situation is very fluid. manus: the one stat that jars in my mind is china will only knock 4% growth off the rest of europe and the united states of america? .4% is a mathematical equation. it is not a confidence equation. it is nonan investment equation is it? >> again, one has to look at the context. germany, g.d.p. figures, exporgets surprised on the upside. germany exports to the rest of the eurozone more to the u.k. than it does china, the u.s. -- through germany, the market effects through competition germany faces. that is why china has such a
big waste in the trade waste basket. clearly, you know, it -- the e.c.b. for further easing. the minutes we published a few weeks ago, this makes it more likely they think about more easing at some point. francine: if the euro hits a certain amount -- i know they don't talk currencies. looking at charts. >> bringing forward asset purposes. that was pretty much where the level of the euro is today. he is giving anne marie old speech this week. trib interesting. if you look at the run rate of the e.c.b.'s bond buying, they didn't speed up after he spoke. they did, they didn't. possibly on it is
the agenda. manus: in years gone by and in days of yore and when the dow jones dropped 1,000 points you typically saw a little bit of coordinated policy response. merkel said chill. tony abbott said -- should we just be laid back? have a coffee? have an espresso? >> i think we have to wait until the dust settles. quite clearly the problem here for all central banks in the u.s. and europe is that apart from doing more form s of quantitative easing or the e.c.b. taking the rate more negative. it is, you know, they are at the floor basically. that is honestly a problem which markets are trying to grapple with. at this point, the u.k. is still recovering, the u.s. is still recovering.
francine: thank you. manus: let's get you up to speed with some of our other top headlines. good news for millions of people in london. 24 hour strikes have been called off this week. the union said it has suspended the walkouts as a gesture of goodwill. still workers are in dispute with the tube operator over plans to introduce a new service next month. francine: if you still have some spare change after the global market route, the car booking app uber is looking to raise at least $100 million in china. and vicinity vestors willing to ut in money and see returns as big as 109%. manus: sources say the world's biggest diamond producer has dropped prices by as much as 9%.
it is allowing some customers to defer purchases and cuts the full-year production target. ok. let's shift our attention now from the market route which has asian billionaires in their sights. that has been hit the hardest. the richest of them lost $3.6 billion yesterday. saying it outloud -- 3.6 billion for one man's wealth puts this whole thing in context. >> he is a great poster boy for the meltdown that is going on. it is a staggering amount. that alone will probably get you close to being on the bloomberg billionaires index in the first place. that is 10% of his net worth. that is a lot to lose in one day. francine: this is what we have been talking about day in and day out. it is the market route. we are concerned about the economy, the fundamental underlying economy in china.
>> absolutely. that is what is driving these losses. it is a huge departure what what we saw earlier in the year. first half of the year, 50 billionaires minted this china. the market resurging. all of these i.p.o.s. it is a dramatic turn of ea events and all of that wealth, all of those billionaires have seen their fortunes halfed. a lot of them. manus: if we talk about him relative to asia's other billionaires. first of all give me a sense of his businesses and put it in context for me against the other chinese beasts that have been created this year. >> sure. he is broadly exposed. one of his bigs holdings is in commercial properties. another one is the cinema. one of the biggest movie theater operators in china. that is a business he has been focused on growing very, very big. you see him exposed to china's
consumer markets there and of course china's consumer market is a very sensitive and vulnerable sector where all of this concern going on. francine: when you the richest, then the hit is going to be that much bigger. what about the rest of asia and the rest of the billionaires? >> he obviously has lost a lot because he is worth a lot but everybody has lost a tremendous amount. not just in asia as well. the rest of the world. the billionaires, among the 400 . chest lost $94 billion bill gates lost $3.2 billion. ortega, the world's second richest man and the richest in europe lost half a billion dollars. overall 24 billionaires on the index lost over a billion dollars yesterday. manus: keep up the good work, keep tracking down rich and the less rich as this crunch goes on. francine: coming up, the u.s. stock market had its biggest
1,000 point yanked off the market yesterday. we have a better reprieve in the market, hans, what are the drivers? hans: we'll be looking to see whether or not -- futures are indicating a higher open in the states. we have seen some resilience, up in the german market up all throughout europe. we see green across the screen. the question is will this continue in north america? i think that is the question everyone is asking themselves this morning. no one has particularly new information. really the only new data we had coming out is that g.d.p. was as we confirmed in germany at 0.4%. and then the i.f.o. number moves them a little bit, gauging german business expectations was much stronger than expected. so i take those two sides and say maybe the u.s. will continue this relief, this rally we have seen in germany and we'll see positive territory in the major independence sis in the states as well. that is -- indices in the states as well. that is just a guess. manus, you probably know as
uch as i do. francine: i like the way hans -- he has a charge on this. you see? a bloomberg chart. hans, thank you so much. we want to know a little bit about g.e. down 21%. today it was a little bit crazy. i don't have a better word, technical word for this. manus: if you look as some of those big moves that we saw yesterday, it was classal. g.e. you saw some of the teches. you watched the closing bell shows in the states yesterday evening. getting involved in new tech with dividends and find those -- francine: we call g.e. a tech. i know everybody does. i find that crazy. we have to dedicate an entire show about why g.e. is a tech stock. "surveillance" is up next live from new york.
germany grew in the second quarter. germany grew through exports in the second quarter. we go to berlin for a failure to rebalance. the u.s. correction may not be a bear, we look for safe havens anyway. this is bloomberg "surveillance," live from new york. i and brendan greeley. joining me is vonnie quinn. tom keene is out. he did send an e-mail," more cowbell." vonnie: futures in u.s. pointing to a higher open. brendan: i take issue with the post showing a bear on the cover. spent last night looking up the difference between a correction and a bear. vonnie: we are three days into