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tv   On the Move  Bloomberg  February 26, 2016 2:30am-4:01am EST

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sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. diving welcome to "on the move." we are counting down to the european open. i'm guy johnson alongside hans nichols who is in berlin. china says it is not done yet. the head of the pboc says there's more scope to act. the right tool for the job. wolfgangnance minister schaeuble says structural reform is the only way forward. mark carney warns on negative rates. who is right? misses on the oil
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price but is still banking on $40 a barrel. we are going to ask the company's ceo at 8:30 london time. the g-20 story front and center. carnies point is an interesting one. and schaeuble still banging the drum about structural reform. he sees that as the only way forward. hans: there isn't a whole lot of structural reform heading in the direction schaeuble would want in germany. toy have all these refugees build housing for, to feed. that is a lot of fiscal stimulus. at the bundesbank, they are talking about having 0.25% increase on gdp. schaeuble in some ways is making the opposite argument of what he's doing at home. guy: plenty to talk about. we need to talk about the cpi
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story as well. inflation, let's run you through what the market looks like with 28 minutes ago until the equity market open. is a risk on story. it has been a risk on kind of week. stoxx 600. 1.2%. ftse looks like it is opening up 1%. a littlealk basf later. ats: let's take a quick look some assets. brent up just a little bit this morning, north of that $35 a barrel. it just went down a little bit. we've got a slightly weaker dollar. the new zealand dollar story showing some increasing strength. 2.61%.g seng up let's get a bloomberg first word now with caroline hyde. caroline: hans, thank you. the threat of brexit is hitting sentiment in the u.k.
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the upcoming eu referendum will curb housing activity. the measure of consumer optimism has plunged to the lowest in almost three years. the pound has fall and against the dollar and is headed for its worst week since 2009. football's world governing body chooses its next president today. the candidates have been making their final pages, saying they are committed to restoring fifa's reputation. they will vote for a successor to sepp blatter, whose presidency was cut short by unprecedented corruption scandal. voters in ireland to the polls today to elect members of parliament. pulling opened at 7:00 a.m. local time and will close at 10:00 p.m. tonight. global news 24 hours a day powered by 2400 journalists around the world. hans: thank you, caroline. china stocks stabilize after the
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head of the pboc sought to calm fears. the governor said china still has room to stimulate growth if needed. he made the remarks just as the g-20 summit meeting gets underway in shanghai. moneyna still has some for policies to address potential downside risks. china is also improving its monetary policy framework towards more price-based measures. hans: joining us now in london is running the case -- ramin nak isa. versus look at this zhou sure view, what do you see coming out of the g-20? are we going to have another communique where everyone is talking past each other?
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ramin: we will see how much policy can help from where we are now. everybody is exploring the zero bound. nobody knows what is going to happen with respect to the zero bound. what can policy do from here? we prefer to have structural reforms. we would like anything which is growth-positive and increases the transmission mechanism between what central banks are doing and what is happening in the real economy. what the bank of japan did would be a very good solution in europe too. if you are lending more to the real economy, you don't get so much of a hit with negative deposit rates. that would encourage banks to behave as the central bank wants them to. that would probably be a good policy outcome. for the g-20, i guess as you say, more talk, but i think it's really what the central banks do
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which is much more important. mentioned the zero bound. when we go further negative, we might get that in march. have we theoretically tested what is happening with negative rates? there is a line that even though you are taking them lower, you are strengthening the currency. ramin: economists don't really know what is going to happen. building theory on the fly. it doesn't help us much at this point. i think what is clear now is that banks are seeing this as a tax. several banks tell me that they are limited in terms of what risk they can take, and having a negative rate which they can't pass on to clients is a tax on their profit. that will decrease the amount of lending in the economy and it will be growth negative, which is not what the central banks want. we have to consider whether it is going to be worthwhile to
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pick up rates further or whether we should go down the japan route. guy: let's talk about china. the pboc say there are plenty of tools in the box. what is the problem in china? they've got a huge debt overhang. we've got a growth issue that is part and parcel of that story. when you look at the tools being talked about elsewhere in the g-20, how does that fit into the china narrative? ramin: they are very much living in their own sandbox. the have a closed capital account. they also have control over outflows to a certain extent, much more than certain other countries. what they have to do is manage the deceleration. if you look at the housing market, there are signs that that is starting to improve slightly. we see about one third of the cities in china having price rises. look at what happened with policy and how it affects asset prices.
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that really started to lift asset prices. are we in a similar situation in china, where the market just needs to hear from the chinese that they are going to deal with this? the global economy is starting to rally. we are starting to feel better about the world. is that down to the chinese starting to talk? they are communicating. that is what the market wants to hear. ramin: we certainly need to know about what is going to happen to commodities. that was the biggest transition mechanism from china to the rest of the world. the price of houses, the housing market in china, is key. growth is becoming less commodity-intensive. a lot of the shock we saw was due to the oil price fall and the cover price and industrial metals fall. if we start to see that stabilize, that will be positive for markets. guy: communication is what i
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want to focus on. we haven't heard from the pboc in a long time. we are starting to hear from him in a more regular basis. the market was confused about policy formation. we cut comments now. maybe it is a sign of them needing to get in front of the story. they are starting to communicate. how critical a juncture is that? this is another step toward having an open capital account. they're going to have a currency that can float. maybe not in my career, but it will happen. this is a step in that direction. they will show you what tools they have in their box. they have this very large foreign reserve. they have very high rates. they have huge structural reforms which they can do very effectively given the centralized government. i think he has a lot of tools in the box. worried about not the hard landing this year.
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growthforecasting 6.2% this year, 5.8% next year. a managed deceleration is what we're expecting. guy: all those tools in the box that kuroda maybe doesn't have. ramin nakisa stays with us. next, kuroda's inflation problem. japan cpi stays at zero, leaving him far away from his 2% target. that story next on "on the move ." ♪
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to: french cpi is about break. let's get your bloomberg first word news. here's caroline hyde. caroline: royal bank of scotland has reported its eighth loss. tosaid its net loss narrowed 1.9 8 billion pounds. the company also said pretax profit excluding charges and restructuring costs fell about
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28% to 4.41 billion pounds. -- expects earnings to drop as lower crude prices hurt oil and gas units. it gets a lower contribution from the chemicals union. based on the company's definition of slight, earnings could be as much as 10% lower than last year's 6.7 billion euros. we was speaking to chairman and ceo of basf kurt brock. telefonica reported a fourth-quarter loss as restructuring costs outweighed sales. the phone company posted a loss of 1.83 billion euros. slightly beating analyst estimates. that is your bloomberg business flash. hans: thank you, caroline. people's bank of china reassuring markets that they have room to ease. there is one man not so
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accommodative. german minister wolfgang schaeuble openly opposed any fiscal stimulus package, warning that debt-funded growth leads to fying the-- to zimbi economy. mark carney raised concerns of his own. >> it is critical that measures boost domestic demand, particularly those sectors of the economy that still have healthy balance sheet. there are limits to the extent to which negative rates can achieve this. hans: -- guy: carney warning on the zero-sum game of negative rates. inflation remains a problem. french cpi breaking, year on year -0.1. we were expecting 0.1 positive. the month on month figure, 0.3. we were expecting 0.4.
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we will get more out of the rest of the eurozone as we work our way through the morning. this ahead of the march 10 meeting of the ecb. euro-dollar, not much reaction. cpi, not exactly looking great at the moment. in terms of the kind of way this is going to work with draghi, i think we have something to talk about later. no inflation, certainly an issue for japan. inlation was at zero january. it puts bank of japan governor kuroda far away from his 2% goal even after adopting negative rate policy. some economists are forecasting further easing after that negative rate announcement. how far away, ramin nakisa, are we from full monetization of japanese debt? policy toolsk his
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seem to not be working. whether he's going to step back from the brink is not clear. i think more purchases is the most likely option. but his history has actually been a very good one in terms of surprising markets. he does a very good shot and awe story to markets. guy: but it hasn't got inflation. ramin: it hasn't. guy: he said he would have 2% by now. we are not there. ramin: from our point of view, it is stimulating markets. if you look at what happened to risk assets in japan, it tends to rally. short-term, -- guy: is he stealing demand? ramin: that is the risk. now that everyone is adopting these negative rates in the u.s., they've started talking about negative rates. there was a question in the fomc meeting. in terms of his policy
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actions, it will be interesting to see whether people's another rabbit out of the hat. where could the next shock come from? he's exhausted the ability to purchase assets. he's buying etf's, which none of the other central banks do. i think policy is limited from where we are now. i don't see how he could push this string much further. hans: earlier, you were talking about how you don't expect to see currency normalization in japan in your career. either you are retiring very soon or you have no confidence that we will get to normalized policy. at what point is china starting to steal demand from other asian and developed countries? ramin: i guess it is dependent on what kuroda does. the places where we would like
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to be at the moment, certainly kind of long em currencies. dmexpect outperformance of versus e.m. this here. we are using that as a hedge in our portfolio. we like to belong risk in europe at the moment, but the hedge we have is to belong dm currencies versus e.m. in terms of yen, it depends on what kuroda does. guy: thank you very much indeed. ramin nakisa still with us after the break. we have the open. we have 10 minutes to go. somee going to look at potential corporate movers, including rbs, who reported their eighth annual loss this morning. ♪
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it is 8:52 in berlin. probably the same time in frankfurt.
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and i were back in london if my clock is right. caroline hyde has our stocks to watch. caroline: we are keeping a close eye on rbs. this is a u.k. lender and it is trying to start to move away from government ownership. start to give money back to the shareholder base. we are seeing rbs underperforming where markets have been hoping. we had that overall announcement back in january, that warning we got than they were taking significant hits related to restructuring costs. overall, strip away those one-off items and you see that the overall profit was a miss in terms of estimates. they are the biggest taxpayer-owned lender in england. since thatal loss bailout in the height of the financial crisis. 1.98 billion pounds in terms of a loss.
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actually, it is a 20% fall in pretax profit. that fall is overall a miss. we are likely to see the stock fall slightly on the moment. this is telefonica. spanish company. we are likely to see that fall on the open. europe's second-largest phone company reported a fourth-quarter loss. we know this is a company lead in with debt. desperately trying to pay it off. estimatesbeat analyst slightly, but many analysts telling me this is a messy set of numbers. we could see telefonica fall. guy: thanks very much indeed. ramin nakisa is still with us. i want to show you the function on the bloomberg -- basic resources over the last month, banking sector all the way down at the bottom. the market has been rallying. we are in risk-on mode at the
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moment. is that sustainable? ramin: we are forecasting the oil price is going to $47, $49 by the end of the year. it has sold off massively. i can see where there has been a bounce. if you look at etf's, they are having massive inflows. people are thinking the price is going to rally in that market. maybe this is the turnaround point. we have seen the oil prices stabilize, starting to bounce around this $25 to $30 range. it does look like we have reached a stabilization point. we still see a problem for markets in the u.s. unless we go above $35 to $40. so a big bounce, but also a massive -- guy: clearly there was a big drop. my question is, does risk-on sentiment continue, yes or no?
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ramin: i would say yes. guy: we will leave it there. ramin nakisa is going to stay with us. we have the open, up next. ♪
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guy: welcome to "on the move." johnson in london. hans nichols is in berlin. here's your morning brief. china says it is not done yet. the head of the pboc says there is more scope to act. the market is cheering, but for how long? german finance minister wolfgang schaeuble says structural reform is the only way forward. bank of england governor mark carney warns on negative rates. ramin nakisa -- basf misses. we are going to ask the ceo at 8:30 london time. if you read a great story, we
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predicted that heavier relay would step down. we have that conversation. hans? hans: remarkable story. that is what we're watching. futures are pointing up. let's get the latest from the touchscreen from caroline hyde. caroline: thank you. risk on, china fueling risk appetite. they've got more firepower left. they can stimulate from a monetary policy perspective. let's dig into how the equity market is opening. we've seen the s&p 500 in the u.s. close at a seven-week high. let's dig into what is making the moves. glencore once again. we are seeing money moving to the minors. we've got metals trading higher today. iag coming up with numbers better than expected. the owner of british airways and other countries trading higher.
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only two stocks are actually trading lower. still some concerns about gold selling off. actually, gold is on the up today. cac 40 up as well. money moving into the equity market, moving into the riskier assets. we've got copper trading up 0.9% and oil on a bit of a tear. this is wti crude, u.s.-based oil. up 0.4% today. on the week, we have seen it spike some 11%. we've seen overall hope that the supply issue might be coming down. we could be seeing that freeze coming from russia. let's have a look on the weekend what has happened to the pound. this is the worst week for the great british pound since 2009. all those concerns about brexit anyying into what m
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companies have been talking about. one company that is going to be affected by brexit, rbs. we are likely to see is perhaps fall a little today. strip away those restructuring charges, litigation charge, and we are seeing profit not where analysts have been hoping. it is down 28% on a pretax profit bases. watch rbs. they are desperate to start giving money back to the shareholder, do share buybacks, and pay back the government. let's look at telefonica, off by 0.8%. spanish telecoms company missing forecast overall. 1.82 billion euros. ferroy, for rope real -- vial, up 1.5%. does particularly well on its numbers.
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they are saying their sales are picking up and they are paying down their debt. guy: thank you very much indeed. where are we with the rotation? we are risk on today. you can see that clearly on the map. sectors in the green. energy once again is leading. i.t. is doing reasonably well. ret me take you to the gr function as well. this is the list of the sectors on the week, basic resources and oil and gas leading the story. take that over the last week. you can see this in action as well. you've got them beginning to come off down at the bottom. on the week, basic resources is negative. banks popping on the week, but still very negative for the overall story. banks have had a good week. hans: kind of remarkable.
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we will see whether that holds up and whether there is a blot rbs, britain's largest taxpayer-owned lender, reporting its eighth annual loss. joining us on set, a man knows a few things about banks. richard hardington. let's start with you. how is rbs still reporting losses? richard: it is almost eight years since royal bank of scotland came close to crashing and required 45 billion pounds of u.k. taxpayer funds. what is happening is they are going through a hefty restructuring program. they were one of the biggest banks in the world. they are shrinking to more than half their size. that comes with cost. it comes with restructuring costs as they take people out and invest in technology. also, goodwill write-downs. they bought a lot of businesses that turned out to be worth a
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lot less than they paid for them. that is something we saw with citizens financial in the united states. they took a 4 billion pound charge on that. they are taking restructuring charges this year. hans: -- guy: the cfo says there's still much to do this year. how much more is there to do? what is top of the list? richard: top of the list, real big item is a charge in the united states. an investigation from the department of justice into u.s. mortgage-backed securities selling ahead of the financial crisis. all the banks have been looked over for that in the united states. rbs is one of the last. it could be a large charge for them, around $7 billion. them, theybig for
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will have less capital to return to shareholders. that is one of the real drivers behind the stock. investors see that as the juice you can get if you own royal bank of scotland. the u.s.g of that in is something that will dictate returns to investors. guy: stock has just opened down 10%. ramin, your view is that the bank selloff has been overdone. lloyds bouncing quite strongly. rbs being absolutely hammered. ramin: we published a note saying this is not a systemic crisis. a lot of clients i speak to are talking 2008. this isn't 2008. balance sheets are incredibly strong. the bankss insured have strongly capitalized themselves. this is an earnings issue. margins are going to be suffering because of the
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negative rates. unless we get some kind of normalization of policy, i think that is going to continue to be the case. we are seeing the fear in the markets stop issuance. anyone who is involved in issuance is going to suffer as a result. it is going to be hard to sell at the moment. the market is completely shut down. i think that is going to be a problem. where is the revenue going to come from? with loan growth being tepid, that is the question. ramin, i'm glad you said normalization of rates. i don't think we are going to in the nextation couple of years. richard, when you look at this negative interest rate world, which of the banks, and you've got a nice perspective in london, which are most exposed? richard: the european banks are
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clearly going to have the biggest challenge, the likes of , withhe bank particularly the ecb potential move to negative rates. that is negative for the europeans. lowhe u k, we have record interest rates from the bank of england. that takes money out of their pockets. it is something that if the rate was to rise, they could earn more on the deposits they have. it is something they are struggling to cope with. the only answer in this environment is to cut costs further. the profitability measures are really being driven by those cost cuts. here's a question mark as to how far and how quickly these banks can go to deliver those improvements in this low rate environment. it is a difficult time for the banking industry across europe. guy: just to update you on what is happening, rbs down 11%, the most since 2012 after another
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banking loss. let me take you to the issue of the oil sector and drag that in. nice piece this morning talking about the fact that the banking sector in the u.s. has been much more upfront about its exposure to the oil sector. ultimately, a smaller exposure to the oil sector then maybe the european banks do. you are predicting oil to bounce. aren't we just repeating this problem, european banks slow to recognize losses, slope to reform, slow to get the house in order, slow to generate the transparency that investors want. richard: you have to step back and look at the picture we are praising into earnings. if we are assuming you get nine times are oe for european banks, the market is pricing in a 20% earnings recession. we think gdp would have to go to a two standard deviation shock
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downward to get that kind of earnings. we are far away from that. guy: there's some really big names that are down really hard this year. to the specific issues of deutsche and credit suisse and everything else, when you break out what is happening here, do you have to look at the individual banks and balance sheet? can you look at the sector and say we've got a big problem, because there are certain banks that have some serious and significant problems? richard: there's this thing called the s-rep ratio, a level of capital you have to keep before you start cutting your dividends and bonuses. guy: who is close to that number? richard: a lot of italian banks. standard chartered have low capital cushions. if you plot the size of the selloff, you can see a strong relationship. look at the size of that
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cushion. that will be key to performance as we pounce out of this oversold market. hans: you are expecting a balance out. i'm glad you mentioned the italian banks. when we look at the number of banks in europe and the pressures they are under from europe and this low interest rate, at what point do we have consolidation? are we going to have some 500, 600 medium-sized banks? think there will be consolidation, particularly in peripheral regions. i think they are overserved in terms of banks. for the sector itself, i think the market has been too pessimistic. we do see strong balance sheet have seen the market selloff to a ridiculous extent. some of these bonds are trading 15 points down with volatility of 40%, which for a bank bond is unbelievable.
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deutsche is trading at something like 70% or 80% volatility in the equity market. i think that is an overreaction to the situation we see in terms of balance sheet. guy: are you prepared to put your money into the banking sector? ramin: i can't say, but i could wink. guy: that is enough. richard, thank you very much indeed. richard partington joining us. i want to show you the terminal. this is the year to date banking sector. nothing in positive territory. unicredit down by one third. credit suisse down by nearly 40%. been somethingas of a rally, but the numbers they are coming off to start this rally are fairly amazing in many people's minds. up next, a man who called the emerging market rout has details for the bulls. details after the break. ♪
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guy: 15 minutes past the hour, london looking gloomy this morning. when will this change? we are down by 8%. let's update you on all the news you need to know. here's nejra cehic. nejra: china's central bank has tweaked its official stance on monetary policy, defining it is prudent with a slight easing bias.
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that came after the head of the pboc sought to calm fears about the health of the world second against economy. governor zhou made remarks just as the g-20 meeting gets underway in shanghai. some monetary has addressools to potential downside risk. improving its monetary policy framework. nejra: meanwhile, germany's finance minister says he opposes any fiscal stimulus plan from the g-20. wolfgang schaeuble wants to focus on structural reforms. he says the monetary policy has been exhausted and warns that using debt to fund growth just leads to zombifying economies.
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hans? thanks. one of the few people to anticipate the slump in emerging markets says he now sees no signs of a turnaround. london-based strategist john paul smith says the current environment resembles that of the late 1990's when the crisis ruled the asset class. his stance clashes with bullish pronouncements from like rock, goldman sachs, and franklin templeton. n, let's get your view on some of this. we had that chart earlier when we were talking about banks' exposure to oil. what is the bigger problem, oil exposure or this low interest rate environment? ramin: i think oil is going to be chunky. it isn't the kind of widespread problem. there are certain names with have these large oil exposures.
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e.m. exposure is another thing to consider. u.k. banks have a lot of asian exposure. depending on where you think the e.m. crisis is going to be, you have to choose your bank selectively. where we think the problem is going to be in emerging markets is where the banks are weakest. look for companies that have debt the in hard currency. tokyo, indonesia, have that problem. these are places we think there could be downside on currency and on assets. guy: john paul stevens, we were mentioning him. they are not worried. they are worried about us. one of the risks they were talking about was the european banking system. they liked my notes saying there wasn't a systemic crisis. a lot of their debt is denominated in euros and dollars.
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another thing they were talking about was the replacement of the central bank governor. these are things they are worried about. unsustainable growth wasn't on the list. guy: but you look across the skyline, cranes everywhere. ramin: exactly. construction all across the city in istanbul. this might be unsustainable growth in turkey. because it is funded by external debt which may be difficult to roll over once you get a weakening of currencies, if the lira does start to weaken, this will become a real problem. that could be a trigger point for the next crisis after the oil problems we and seeing -- we've been seeing. guy: when you think about what is going to happen in countries like russia, in brazil, john paul smith talks about potential real problems in countries like brazil, like a proper emerging market crisis. are we back to that point?
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if you take this all the way back to greenspan, asian market crisis, are the central banks set up to deal with that story? ramin: this is a story from our e.m. strategist. they are saying that a lot of the state owned enterprises are standing ready to bail out some of these corporations, which have funded themselves in foreign debt markets. the balance sheet of those sovereigns will have to take a hit. that might be a problem down the road, these companies suddenly become a sovereign problem. this will become a sovereign spread risk and we could see sovereign spreads widen as a result. how do they roll over this debt? that is the concern. a part of it is short dated. if you look at the turkish issuance, it could be hard to roll over. see the same problem we
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see in the u.s. high-yield market. start to widen, they won't be able to roll over the deck. guy: it has been a great pleasure. thank you for your time. up next, we see the saudi-led oil glut impact u.s. producers. we're going to get today's chart on the matters. that is next, here on "on the move." ♪
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hans: welcome back to "on the
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move." u.s. oil drillers are beginning to buckle. caroline hyde joins us with a chart that really matters. caroline: at last are we starting to see the u.s. shale makers admitting defeat. they are pulling back the reins on overall production and discharged does outline the scale of cutbacks for 2016. we've had earnings coming out of the apache and they are starting to say production is coming down. we can really dig into these numbers, apache saying we're going to cut back production to the tune of 7%. across the board, you are starting to see the ramifications of near 12-year low crude prices. we've had really surprising resilience over the past couple years. the fact that we've seen oil prices down some 70%.
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we kept seeing share companies of their wellst to scale back in terms of cost. it seems as though the continuation of opec adding to the glut of supply, determined to keep their market share, seems to be now that the shell companies are starting to react. guy: we look forward to hearing what is said in terms of the numbers. here's my question. are they being forced to do this? are they preserving cash? are they waiting for the oil price to bounce? you can talk about the downside on the oil price risk, but you can also talk about the cap. when these shale guys come in again, they will effectively cap the price of oil. caroline: there's a big conference happening at the moment. it is all in houston. they are starting to see, basically there are two choices. they are close to coming out of this event saying that you lower
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cost, you borrow cash, or you liquidate. production is and coming down 50%. it is coming down 4% for some of them. it is not dramatic, but the overall scale of having to make some sort of changes to the way in which their businesses are run, to support their own debt ratings, this is starting to factor into the markets. we are seeing borrowing costs for investment-grade companies still triple b minus. yields trading higher than we've seen for junk rated companies. the bond market is screaming at them. their production rates are starting to come down. whether or not we are seeing a feel thishink many oil price is going to be lower for longer. they could come back to the market. hans: caroline hyde, thank you so much. so much enthusiasm.
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clearly you are going to draw the houston assignment next year. next, we speak with the ceo of basf has the company sees its profit drop slightly. ♪
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manus: welcome back. this is "on the move." we are heading into the end of the month. people will be moving around their sector stories. indexes up to percent. the cac 40 is up 1.9%. the ftse 100 is being dragged down this morning. the energy sector is leading the charge this morning and is up by 2%. materials are doing well as well. on the week though, it has been financial services and banks that have been leading the charge this week. it has been the basic resources
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that have been the leg up. it is a leap year. let's get you caught up. let's go to caroline hyde. caroline: we're focusing in on travels. this is one of your best performers. this is amedeos it. beatingee it expectations with its numbers. it is up 5% of that the moment. profit is in at 751 million euros. a good, strong story coming from the travel sector. belgian drugmaker ucb is also one of the top performers today. they are up about 4% for the moment.
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for 2016, its earnings per euros,ould be up to 3.2 well ahead of the 2.6 euros. analysts have been expecting. profit and sales are doing well for this particular drugmaker. on the downside, they have been drivingabout the rbs the stock 600 lower. the rbs is disappointing. we can see it is actually down 28%. the big concern is when will shareholders start to see some sort of return of cash? not by the first quarter of 2017. we are born by the chief executive -- we are warned by the chief executive. they have to pay 1.2 billion pounds to the government.
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we have such hefty charges coming in to the tune of about 4 billion pounds. back to you. guy: great stuff. the g20 finance minister has a meeting in shanghai. earlier, goldman sachs president spoke exclusively with david inglis, saying people need to lower their expectations. >> i think expectations are always high going into these g-20 meetings, these imf meetings, the world bank meetings. the reality is, the messages are never that clear. thatld censor expectations something really major comes out of this weekend's meeting. that said, one of the big fundamentals driving market volatility today, outside of
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liquidity, is what is going on with global growth. china is clearly at the center of one of the questions of where is global growth going to come from? we have all seen china slowdown from a double-digit plus growth economy when they were going through their big environment. we have seen them drop into the mid-single digits growth environment. 5, 6, or seven we don't know. the economy today is being driven by consumer spending. what does that mean? consumer spending is consumer discretionary spending. what the world is tried to figure out, is china able to transform the 400 million people? they moved from rural china into urban china. have them enable to transmit -- have they been able to transmission them to become real consumers? and if they have, what economic
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growth is that creating? reporter: that is a very slow process, though. mileuld see this from a away. why do you think people are panicking at the moment? >> first of all, this has all been highly telegraphed by the chinese government. we are talking 20 or 30 years of policy about building infrastructure, talking about creating consumption. none of this comes as a surprise. but this is happening on top of unfortunately, a slowdown in many of the other developed economies around the world. it may be just bad luck or it might be bad timing, but the reality is we need a strong, growing economy in the world to drag the other economies with it. we have allied upon china for so long to be the big growing economy out there. without china growing in double digits or even high single
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digits, the world is unsure of where to rely upon for growth. reporter: that was president cohn speaking to david inglis. you can hear him talking about tempering expectations. guy: it is interesting. he is asking, can we rely on china? he is very cautious on that. if i was running a big plastics company, i think i would think the same. hans: we will have a chance to basf.o the ceo of bock is joining us from the headquarters. it is a first on bloomberg. thank you for joining us. last year at this time you were predicting $70 a barrel. it looks like we will be in at range.-$40
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what does this mean structurally for your company? eed to change the structure of your company? guy: i think we may have a communication problem. we will make sure we get you back there very sinoon. kurt bock, the ceo of basf standing by for us. i can hear that kurt bock can hear us. mr. bock, let me first check that you can hear me. excellent. >> i can hear you. guy: this time last year you are saying that you did not believe that oil would stay at $70, you thought there was upside potential. now we are in a situation where oil is around $30 and you are
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basing your projections around $40 a barrel. some people think it will go lower. are you worried you are being too optimistic? >> i don't think i am too optimistic. likeyear we said something $65. that did not happen. that was a big negative for basf , obviously. this year, our assumptions are $40 per barrel. if the oil price stays much lower, and we cannot rule that out, that would be again, negative. but please keep in mind, we want to improve all earnings in 2016. guy: mr.bock, how do you outperform your sector? that is the big question. your stock has underperformed. what do you need to do to get out in front? growth a clear target to at about market growth, which is about 4%. that is possible, although in
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2015 we saw a slowdown in our asia markets. those are very important to basf . obviously, 2016 volume growth is important. rising is a different issue because it is clearly linked to the oil price. the oil price deflation is not a positive for the entire industry. but we need is a stabilization of the oil price. and then, a better overall environment for our chemical markets. hansans: mr. bock, nichols here. merger.this chem china in terms over for bas basf of the agricultural space? we have seen a couple of smaller things in 2015. yes, our industry is changing.
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weather that is strengthening the industry or whether this is just rearranging the shares, remains to be seen. there has been some consolidation, but from my point of view, the acquisition of syngenta does not change the industry structure. hans: that does not change or outlook in terms of agricultural chemicals. you are still on the prowl for potential deals out there? we have done very well in 2015 when you compare that with our entire industry. yes, growth has come down a little bit like in the entire industry. we have a very innovative portfolio will stop we have a pipeline of new innovations. we are very positive about our business. we made a clear decision 10-15 years ago not to enter the seed business.
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guy: what is your expectation for your business in china this year? thechinese say they have opportunity to be able to make sure they can stabilize and grow their economy. do you believe the chinese authorities? we have seen a very mixed picture in china. we has seen margins coming down. overve overcapacity and investment. in other parts of our business, especially in the automated region, we have seen tremendous growth. the business has grown two digits, and that is something we will continue in 2016. i am not the expert on the chinese economy overall, but certainly growth will come down a little bit yet still for the chemical industry. ofs is about the majority
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the growth coming from china still. that is still a focal point of our activities. hans: i did not hear an answer to anything on agricultural chemicals in terms of m&a. are there any possibilities on the agricultural chemical side? or have you given that up? >> we look at the industry and try to understand our position. we have a very strong portfolio with good growth. we are very comfortable with what we have. at the end of the day, you have to answer the question, how do you create value for your shareholders? look at price expectations in the market. you have to make up your mind if that is something creating value or not. bock, we thank you for your time. up next, i will be talking about germany's refugee strategy with a man who has 35 years of
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experience in u.s. border control. ♪
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guy: 45 minutes into the session. the energy sector is leading us at the moment. london is being dragged lower by the banking sector, rbs in particular. let's get you some details with the bloomberg business flash.
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nejra: the royal bank of scotland shares have fallen sharply this morning after britain's largest taxpayer said it would take longer than it planned to resume shareholder payouts. at the same time, rbs posted a net loss of 1.90 billion pounds. ashave a fourth-quarter loss restructuring costs outweighed recovering sales. 1.3 posted a net loss of billion euros. atat slightly beea analyst's estimates. the group would have headquarters in both london and frankfurt. , steppingould see ceo down. that is your bloomberg business flash. hans?
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hans: germany has a great to back asylum. everybody is talking about that give rules that iwlwill angela merkel a chance to affect the number of asylum requests. this place and expulsion for those who do not qualify. joining us is a former u.s. customs and border employee. now you are with global security and innovative strategies. thank you for joining us. you are speaking to members of my angel angela merkel's government. reporter: good morning and thank you for having me. first of all, it is an impossibility to close off a border. it is critical to learn to manage and control a border. here, the situation we have got is a lack of cohesiveness. we need a unified, collective effort that brings a semblance
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of control throughout the european union. and we do not see that. hans: this morning, german 13% ofreported that refugees have gone missing. what sort of security risk does this post? >> tremendous. you need to be able to track, identify, and classify everyone entering the european union. in the case of the united oftes, we track bu usy use information. wherever they go on the country, there is a system. david, can i ask you a question? give us your sense of the scale of the problem that europe faces now. >> the scale is tremendous. look at the situation you faced. we had over one million people enter the european union, the vast majority coming into germany and sweden. what concerns me and what should
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concern the eu right now is there is a staged group in syria, lebanon, and georgia. there is a total of 4.7 million displaced people in syria. there is another 1.7 million in jordan and another million in lebanon. they are staged to head toward the eu. that is why doing everything possible to address this in a cohesive fashion is critical. one of the things i will talk about now is the border that is being looked at in the european border. the greece you needto happen is to push your borders out towards turkey and syria, with the possibility of a safe zone. officers can help in segmenting the flow.
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one thing we need to understand is that this is no longer just a refugee crisis. this is a migrant crisis, a migration situation. there is a composition of the flow that includes refugees and economic migrants. as early as possible, segregating and segmenting the flow, those that you can as quickly as possible, is going to be critical. hans: how difficult or easy is it to falsify the european passport? >> unfortunately, it is fairly easy. in the unitedthis states with our own migration crisis. cottage industries sprout up to cater to the needs of counterfeit passports and documents. that is what is happening now in the eu. the smuggling organization is one of the primary growth industries within the criminal sector because there is a need for that that is filled by these
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smuggling organizations. hans: thank you for your time and good luck fo with your speech. we look at the economic indicators out of europe today, including one that could influence the ecb's next move. you know i get excited whenever we talk about price inflation. that is up next. ♪
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guy: welcome back.
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the european equity markets are on the rise. let me show you what the numbers look like. we have a positive picture and energy is driving these markets forward. let me tell you what we have coming up later. we have years of dat -- we have eurozone data. germany's numbers come out at 1:00 p.m. we will be watching the g-20 meeting, already bringing up plenty of conflict. cpi is very exciting for you. hans: this chart gives you inflation expectations. this green dot is zero. that is the expectation for cpi across germany. every time you we are in frankfurt -- every time you are in frank bird, you can bump into an economist. this chart tells you a different story. it is eroding some of the
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arguments from the naysayers on the ecb. you need to do more. guy, let's go back to you. i think we have one of our favorite guests. guy: before we get to richard jones, who probably does know more about fx than both of us, i want to show you this chart. this is the spread over germany. you have island all the way down here at the bottom. that has been the dividend of what has been achieved by the governments over there. the irs are still there in great. that is the wb function. rich, let's bring you in. let's talk about the g-20. the chinese versus the germans. >> we have heard the chinese say, monetary policy is not enough. we need fiscal stimulus. i think they were pretty much pouring cold water on that.
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the is a pretty strong counter position for both of those important players. strongw, that was pretty language for a central banker to speak about negative interest rates and the affects on a potential currency war. it was quite pointed towards the japanese officials adn tod the d to the ecb. hans: could it be that they are right you don't need to do structural reforms, but there could be more tweaking? >> we know monetary policy is not the only game in town. i think he has a point in the long-term. it is something the germans have talked about for a long time. there does need to be structural reforms. in the near term, a lot of policymakers are saying, we need to deal with the short-term
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problems and fiscal stimulus is required to do that. guy: stay with bloomberg television. "the pulse" is up next. have a great weekend. ♪
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francine: germany's finance minister says stimulus options have been exhausted and reform is the only option. finance ministers and governors heather at the g-20 in shanghai. says chinaor zhou still has room for more easing. apple versus the fbi. the tech giant laser out the argument against unlocking the iphone used by terrorists as facebook, twitter, and microsoft prepared to back their arrival.


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