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tv   Bloomberg Markets European Open  Bloomberg  December 12, 2016 2:30am-4:01am EST

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>> monday morning and welcome to "bloomberg markets: the european open." the first trade of your equity day is coming up shortly. i'm guy johnson, alongside matt miller. arabia saysnd saudi it will deliver even deeper production cuts as the russian oil minister tells bloomberg his country's cuts will take place next month. the question is, how quickly will the u.s. share respond? old poland.,
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italy's leader is handed a new list of things to do. and tracing the dots. sent.s. 10 year yield is to its highest level in more than two years. what does this mean for the other asset classes? we will ask aberdeen's head of commercial property. matt: we are less than 30 minutes away from the european open and you can expect to see a lot of action this morning because of that oil srurge. futures are trading up across the board. we are looking at gains for the ftse, 1%. for the cac, almost .3%. the dax is gaining as well. pointing to a positive this morning as oil is expected to produce. they are big heavy components of
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these indexes. guy: let's see how london opens on the back of what you are talking about. this is the gmm function. wti crude, it is a big and aggressive move in the commodity space. brent is up by 4.45%. we can see some decent sized moves coming through into the energy staes. we are seeing what is going on in the bond market. look at what is happening with the french 30 year. look at what is happening with the japanese 30 year. yields are rising and prices are going down. it was a really good equity session friday for europe. will it be a good equity session? we will spend a lot of time talking about commodities this morning, but focus on the bond market space. this week of course, fed week. here's the bloomberg first word news.
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reporter: thank you. president elect donald trump says he is close to naming his secretary of state, dropping heavy hints it could be the exxon-mobile ceo. tillerson has not been offered the job yet, but is likely to be picked. the outgoing foreign minister paolo gentiloni was given the mandate to form a new government. this is after matteo renzi quit following his defeat in the referendum. >> i am aware of the urgency of giving to italy a government with full powers. in order to reassure our citizens and to face what the maximum dedication and maximum determination the international, economic, and social priorities, starting with the rebuilding of the areas hit by the earthquake. english hasll
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been named new zealand's prime minister. he was elected unopposed after two rivals withdrew from the race. english succeeds john key unexpectedly stepping down last week. he has a solid economic platform to campaign off of. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. this is bloomberg. guy: thank you very much. monday morning, let's talk about oil, the big story. we agreeded after the russian oil minister, spoke extensively to bloomberg television about the deal. >> i have to say the situation is different as we go country by country, but i was very pleasantly surprised to see so
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many countries respond to the invitation by opec and russia to participate in this. i would have to say most of the countries joined and is very important to say they join voluntarily. nobody will force them to reduce production. it is of their own will. most of these countries will be taking active measures to reduce production, and that is very important. manus: the group will reduce output by 550,000 barrels a day, while saudi arabia will now cut substantially to be below the target degree and last month's deal with opec members. let's go to vienna. saudi says it is going to cut more than we thought it was. how much is saudi going to cut? that is the big question the market is asking itself this morning. >> that is right. this is the shocking news that came after opec and its rivals agreed on this deal.
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the saudis are ready and willing to cut below 10 million barrels a day. they did not give a number, but that is a key psychological threshold for the kingdom. since 2015 the have not gone below 10 million barrels a day. it is psychological for them in the market and it is a bold statement for them to say they .re ready to go below this line that is what they are saying boldly to the world and market there, they are committed to this deal and rebalancing the market and to gain back prices. matt: donald trump suggesting on twitter the possibility of rex tillerson as the secretary of state. how is the news being taken in vienna? >> well, rex tillerson, the
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highlyobile ceo is regarded in the industry. i am not sure how that is going down within political circles. but oil ministers seem to like rex tillerson. he is definitely liked in russia and his relationship with putin goes back to the 1990's. i did speak about rex tillerson and his appointment. exxon was one of those recent investors into mexico. take a listen to what he has to say. "bloomberg daybreak: europe he has -- >> the company has worked for much. he is very well regarded. participation of exxon is very welcome. sayingflores-quiroga,
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tillerson is a friend of mexico. he will be the first oil administer and second from texas. guy: thank you very much, indeed. she seems to be camped out pretty permanently. we will have the nigerian oil minister live in london and will be joining the surveillance team at 9:30 a.m. more insight into what is happening inside opec, inside t he oil market and the relationship that exists. let's bring our guest into the conversation now. how much lower has oil got to go? >> i am a cynic. look at your chart over there, the u.s. rate count. christmasint h the
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period, anything can happen. looking further down the line into 2017 and beyond, why would this agreement work? the only way it will work is if the saudi's will be absolutely determined and will take a great deal of pain, a disproportionate amount of pain. i am not convinced they will do that. their finances are nine trouble. up toir shirsts add more than miller the dollars, i think it balances out the cash revenue. so loss of cash flow is pervasive that i think the incentive to cheat unfortunately, i think will continue. so many different
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player. you have iran and iraq. you have russia, who has historically never rained in production. preparing for are the ramc ipoe. oilbreof of a barrell of will play into the price of that ipo. how important is that. their desire to puff of the market, or take all the pain in the short-term to get that ipo off the books. that is probably a good point and it could give us our turning point in a few months time. but switching the argument to alwaysand side, it is very well to talk about the supply side, but what has happened to demand?
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and the increasing spike in u.s. bond yields, emerging markets have been in trouble. and emerging-market, they consume virtually all of the growth in oil. the chinese stock market, down 2% over the weekend. emerging markets really pick up 2017. extra growth in we will have demands as well. guy: this is the contract table , and this is for brent. the green line is the curve on the 30th, when the deal was struck with opec. as you can seethere are interesting happenings at the front end of the currve and we still only get up to the same kind of facethe market is looking at what is happening the shale. it is looking at the cynical
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aspects many people are sharing with you, i suspect, in terms of whether noncompliance will be a part of that story. why is the market not pricing more to the upside. this is a historic agreement and yes, you can be a cynic, but even at the margin it has to be a little more of an upside. >> the market is wrong, putting it bluntly. if you think about stocks, they are at incredibly high levels. andmarket was already long, perhaps are breathing a sigh of relief that they can brand a couple success of stocks into the face of opec producers. there is another longer-term the oil market, the commodity market i was in trouble because they were positives that pick up the nearest growth in your nature. probably the reason why we out
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of balance the balance is probably summer between 40 and 50, we spiked up the top and before that 50 barrel. but at the end of the day we will come back into that range. matt: healthy dose of skepticism. you'll stay with us. marcus sentiment swings on projections and treasury yields. plus, banking on the next prime minister. italy's biggest challenge will .e the challenging the u.k. property market post brexit, it is pretty weary.
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manus: here is a live shot of the brandenburg gate. a bit of a drizzly london-type morning. dax feeders are pointing down now. equities might be a little bit
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unbalanced this morning, or back and forth. president-elect donald trump's victory has unleashed bets on stronger u.s. economic growth and has led traders to begin pricing in a quicker prais pacef fed hikes. the market expectation is now one percentage point below what the officials forecasted in the recent dot plot estimate. the green line is what the fed has been forecasting with its dot. the blue line is where the market expects those rates to go. this here is the smallest gap since 2014. the next fomc decision is due on wednesday. stephen, what do you think about the possibility that the fed is facing some upwards pressure on its dot plots because of
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trumpenomics? >> this is absolutely key to everything in the next couple years. the fed today and the fed in three months might be very different in the sense that the donadld has two picks. donald that will make a big difference. -- that will make a big difference. you are really talking about the two people who would be the fed chair and deputy chair that th new administration will be picking. i think he is going to pick two hard money people with completely different of interest rates.r interes the market chose not to believe that when yellen was there, the pace of tightening, if at all, was going to be painfully slow. so, nothing happened on
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8, we could have been looking at a pretty unchanged future. we are not talking about a new fomc. fed the fed included employment and it is mandated. in 2011 we had a piece of legislation that went to the house that was designed to remove the employment part, and guess it was one of the cosponsors? a certain mike pence. he has a unique role in influencing donald trump. some people think the donald will lead on him for these sorts of decisions. in that instance, i think he will reinforce the view that we are going to see a very different fed next year. and i think we will see a proper fed hking. tosibly two hikes in 2017
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2018. 20: treasuries to bunds, points this thi10 basis morning. that the blended yields of the eurozone bonds and historically -- >> at the end of 2017 we have a hike. 350. will be 300 or this is a repeat of the reagan presidency. and the first five years of the reagan presidency the arrest of a 25% and we had an emergency meeting. guy: you think that is going to happen again? >> i think it is. and not just the interest rate point to be a, but the policy.
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the euro was bad and deteriorating. we're going to talk about italy. saveffor powder when it comes to us stephen. up next, we take a look at the movers in today's trading. is all about the oil trading and italian banks are firmly in focus as well ♪
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matt: it is 8:53 in berlin and 7:53 in london. let's get some stocks to watch. obviously, oil stocks will be b ig, key movers this morning, as we had 5% gains in brent and wti, after we had those non opec agreements over the weekend. saudi is pulling out some mario draghi language, saying they will do whatever it takes. these are year to date moves, and they have had some incredible moves, though if you look at the last two to three years, they are still down. but they will add to these moves this morning. guy: the market open, six minutes away. italian banks, firmly in focus.
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it looks like monte paschi will push on with the capital raising, getting cash into the business before the end of the year. the deadline has effectively been set. the other story surrounding the italian banks is what is happening with unicredit. amundi, agreeing to purchase unicredit at $1.7 billion. i want to quickly show you the unicredit and deutsche bank cvs, which surprisingly, has rolled over quite aggressively over the last couple of weeks. well, over the last week or so, despite the turbulence surrounding italy. monte paschi the impact. philips agreeing to sell 80% of its business in lu melids. watch for those shares to
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move. futures, pointing in all different directions this morning. this is bloomberg. ♪
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guy: good morning. you are watching "bloomberg markets: the european open." i'm guy johnson. matt has your morning brief. matt: oil surges. saudi arabia says it will deliver even deeper production cuts as the russian energy minister tells bloomberg his country's cuts will kick in next month. how quickly u.s. shale will respond is the new question. italy's paolo gentiloni is handed a mandate and a long to do list, as the clock ticks for monte paschi. and chasing the dots. fed anticipation sends the u.s.
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10 year yield to 2.5%. what does that mean for other asset classes? guy? guy: looking forward to that conversation. matt, thank you. let's talk about these european markets. -- matt a recent have let has always at how flat this open has been. london is up by a little bit, not by much. it will be interesting to see how bp and shale is trading this morning. we are waiting on the cac and dax. the cac is just opening up in positive territory. but a fairly flat open. the devil is in the details, below the surface. a calm sea this morning, manus cranny. what is going on below it?
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manus: it is where treasury yields go. we have 10 year government bond yields around 2.5%. what does that do to the equity story? breaking good, breaking bad, or breaking out in a new direction? is this they do whatever it takes moment for saudi arabia, in terms of the oil market? how does that translate into the equity story? financials are up by 0.25%. what indications are there from monte paschi? no additional timeline for the bank. yes, you have unicredit selling pioneer. we knew that deal would get done. but is this a moment where bank resolution is put to the test? by the way, monte paschi still has 11.1% in terms of a buffer of capital. you are dealing with an interesting animal. financials are down by 1/3 o 1%.
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have a look at sterling because there is a lovely story on the bloomberg there. we have done a survey. of thetral stnacance bank of england. is that running too far too fast? of englandank survey. 60% responded and said the next move will be a hike to get to the potential to percent inflation target. households have been surveyed. 41% of households expect or believe we could see a hike, up from 21% just a couple of months ago. so, sterling is on the move. equities are undecided at the moment. let's get to nejra with the stoc ks to watch. nejra: i am starting with oil stocks. i have bp and shale. we have seen wti hit that 17 month high on that historic
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opec and non opec deal. keep an eye on the airlines as well because some analysts have said we could see them open lower on the higher oil price. then, a breakthrough for philips, agreeing to sell a majority stake in lumineds. this is after an earlier sale to a consortium led by a chinese buyer fell through because of u.s. opposition on national security consideration. finally, watching italian banks. i have monte paschi, up 5.7%. to equitiese a debt swap in the coming days, pressing ahead to avoid a state rescue that would impose losses on bondholders and shareholders. guy: thank you, nejra. paolo gentiloni hasn't asked
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--paolo gentiloni has been asked to replace matteo renzi. the ecb rejected banca monte dei extra time toor tim implement the capital increase. give us your thoughts, marco. we have a new feminist or and new issues within the banking sector. what is job number one for the new boss? [laughter] >> wow, a lot of questions. well, a week and a half since the referendum. the outcome was a resounding no. renzi tendered his resignation last week. loni was quick to pick up the baton. it looks like he will make a temporary government until the elections that will take place during the first or second week
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of june. he has a huge amount on his plate to solve. the first of which, unquestionably, by european standards is the resolution of siena problem.i the problem is a lot more serious than anybody can expect. they committed initially to invest a significant amount of money, and now it looks like it is up in the air. like you said before, the devil is in the details. paolo gentiloni, a very experienced man. he has been a very easy politician. he does not make waves. he will work this government for six months, but he has a very difficult job in trying to find a way to solve the monte paschi problem, which i insist is a lot more serious than what the market believes. there is a of about 1% ratio that is not necessary -- there is a 11.1% ratio that is
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not as his early correct. the market cap is so low that on average for the last year, both unicredit and the largest bank in italy, the value of their shares traded daily is nearly the same as the entire market capital of monte paschi siena. this shows you what a binary outcome the markets are expecting. matt: they are bidding it up thi s morning. those shares have been halted after getting 5.7% in milan. unicredit shares, big rallies this morning. do you think this is because of paolo gentiloni? because this news is calming markets? or because monte paschi will continue with its plan and unicredit has essentially raised $3.5 billion in capital? perhaps ais actually little bit of all three. thee ibear in mind,
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government has been trying to find a national solution for the monte paschi siena for a while now. the market cap is still very strong with the bank, over 40 billion euros. i think the problem lies within the 40,000 retail salers who bought the subordinated debt. 2008 paschi siena in issued 4 billion euros of subordinated debt. in hindsight, it was poorly placed. the investors were not very sophisticated. the concept, make it such so it is very difficult to try to vinc convince a retail investoro part with what he believes is a debt piece of paper and convert it to sa share piece of paper. cre bonds technically a
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ue in two years time, but during that time, they risk losing everything. this makes it such that italian affidavits,sign off because the bank has to be saved. it is over 500 years old, the oldest bank in italy. it would be tragic. a little reminder. in 1935, over 80 years ago, at of fascism, the italian banks became nationalized. three italian banks became nationalized. again, the government said during those days, we are sick and tired of buying italian banks and nationalizing them
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because banks should be private, run for profit, and not for pandering. guy: marco, i am on my screen, which gives me the breakdown of some of the key ratios surrounding paschi this morning. the price to book is 0.07. is that number real? are there real assets in this business? if so, how do we bring these assets to get a recent valuation on the business and therefore, save it? >> this is a great question. the problem is, the bank right now is mispriced. it should be worth zero, or 200. i think anybody's guess will be significantly better than mine because i am in the eye of the tornado. paschiin rome and monte siena owns hundreds of buildings in rome. in the books, they hold a higher
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values than the current values. are those assets accurately priced? i can give you anecdotal evidence. right around the corner from bloomberg's offices there is a beautiful palace, which blocks monte paschi siena. they have it on their books at 60 million euros. what is it worth? 20 million euros, at best. you have to understand. the viewers have to understand, writtenations that are do not necessarily reflect the actual facts. one has to do a lot of empirical due diligence to verify these things. the problem arises because monte pawn forena has been a getting votes and money,. the foundation, which up until recently owned a very significant part of the bank, was doling out upwards of 150 million euros a year to its pet
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projects to gather votes, the red votes, the communist votes. they were financing wineries, tons of stuff. that was all vote gathering and served no economic purpose, which is the opposite of what banks should do. they should lend money, make money, but a money, and pay. -- make money, borrow money, and pay. end of story. not gather votes. paolo gentiloni is to find a solution to this. he is a smart man. i had my fingers crossed on renzi. he lasted three years. i think he did a great job and got unceremoniously tossed out. i hope paolo gentiloni has a better end. guy: marco, we will continue to talk to you to get your view on
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what is happening. lonsinlser, partner at capital. still think him on the open, we talked about oil, and we will -- still to come on the open, we talked about oil, and he will continue to do so. european majors trading strongly this morning. anbul asgo to hiist well, the former ta that attacks that injured more than 150 people. we look at the forecasts from the director general at 8:40 a.m. u.k. time. we will continue to talk about italy as well. all of that is coming on this program. ♪
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guy: 15 minutes into the cash session. oil is a big feature. the dax is soft. europe, absolutely flat as a pancake. banks are down and oil is up. that is why the ftse is outperforming a little bit, 6966. but it is the banks again, firmly in focus. from an italian and german perspective this morning.
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matt: absolutely. obviously, oil is playing a big part in moves. the big drop in the crude prices helps oil producers. but the italian bank story has gotten really sexy, guy. because of unicredit selling its pioneer unit, it wants to dispose of assets that helps it raise capital. amundi will purchase it for $3.7 billion. and amundi has made a lot of noise about getting bigger, making more assets. inhink it has $2 trillion assets under management. that is charles schwab money, about half of blackrock. pioneer itself is a fascinating story, one of the first mutual funds set up by a reporter 100 years ago. really interesting story and stephen isaacs is still with us.
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let me ask you, it feels to me that for the first time italian banks in weeks are actually making some progress -- actually, doing anything real, as far as moving assets. >> well, the price of the stock, we just saw monte paschi at zero. it is for pennies now. a few percentage points movement. up or down, it is neither here nor there. the market says it is effectively worth zero. banking is all about confidence and once you lose the confidence, you are in trouble. i cannot see how this equity deal could go forward. we have to have come in the short run, in front of the italian elections, some sort of government bailout. i think with the germans digging their heels in, they have their own problems on the nature of that bailout. it will have to be some sort of bail in. what do we do?
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i think the deal might be something like there will be a miss selling premium. people will be bailed in, but they will get some money back from the government on the basis missold there bonds. that does not take away from the fact that there is a complete loss of confidence in the italian banks and that is impossible to get back within the current framework. matt: you are talking more about monte paschi, right? that is the binary story, which is down you know, like 95% year to date. unicredit, is a different kind of story. unicredit has taken a hit over the last 12 months, but is only down by half, which for italian bank, is pretty decent, right? i think it is the more interesting story that unicredit has managed to sell this unit and amundi is growing bigger and bigger in size. >> unicredit is selling the
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family jewels in a desperate attempt to raise cash. that will obviously continue, but if it is possible to raise cash, the remaining italian banks will desperately tried to do so. but moving on to the politics in italy, i think what the referendum was all about was not just a defeat of renzi, but a defeat on the reform process. we have had some tentative signs of reform under renzi, and now i think the italian electorate have really put two fingers up. it was not just a defeat, but a distraction. i mean, 20%. poorly for the elections next year. how do i price italy right now? matt's point is a good one. there are good bits to some of
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these banks. the problem is, we do not know which are which. we don't know which assets we have got. the same thing you could almost go for the country as well. it is really difficult to price italy. we don't know what the political landscape will look like. we find it very difficult to get an accurate gauge of what is going on. he wants to have referendum on membership of the single currency. he is doing quite well in the polls right now. how do i price italy? >> you have to take a view on the politics, which is the key thing. i think the politics is now shaping up to a situation like what we saw in greece. we are a few months away from the actual election, but i think it is more and more likely -- guy: but greece is a member of the eurozone. cypres is doing what he
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was asked to do. >> but we had a destruction of value within the greek bank ks, even more so than we had before hand. i am saying during this roller coaster ride, at the politics will dictate. so, stay away from all of this. we cannot project what is going to happen, except we have a sense of foreboding. guy: so, there is no value in italy right now? >> there is always value somewhere, but the politics has to be settled then we need a sense of where the country is going and i fear for international investors buying assets -- the complicated reason i wish to avoid it, the policy is going in the wrong direction. they will be, at the very least, a major crisis within the eurozone. the very worst is we will spiral out of the eurozone. guy: thank you, we wanted to talk about ets. we will have to do the next time. stephen isaacs.
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turkey's largest city. he will talk about that next. this is bloomberg. ♪
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matt: welcome back to the european open. matt miller here in berlin. guy johnson is over in london and we will go to turkey because the lira has slumped after twin bombings killed at least 38
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people and wounded more than 150. a kurdish militant group has claimed responsibility. what is the latest on the ground in instanbul? >> that is right, matt. turkey, once again the victim of a terror attack. over the last year we have seen at least 12 terror attacks across the country. on saturday it was here in istanbul. at least 38 dead, mainly police officers and at least 150 wounded. the kurdish militant group has claimed responsibility for the attack, saying it is in retaliation for the turkish security force's violence in the southeast. the lira depreciating more than 1.5% against the dollar, the worst performer today among emerging markets. turkey is also dealing with political uncertainty. we saw the failed coup
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attempt in july. since then, turkey has been in a state of emergency. the lira, depreciating 70% against the dollar since then. guy: what will this do to the data? >> we had third-quarter year on year data out just one hour ago. we saw that the failed coup heavily weighed on economic activity. third quarter gdp year on year contracted 1.8%. that is way worse than we expected. we see a slump in domestic consumption, investment, and a drop in tourism. of course, the government, doing their best to revive the economy. just last week, the prime minister announced a $72 billion fund to help local businesses being hit by the weakening lira. but will it help? time will tell. guy: thank you.
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up next, post brexit property impact. we will be talking commercial and real estate in london. that is next. ♪
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guy: -- matt: welcome back to "bloomberg markets: european open." 30 minutes into the trading day. it let us get a check on how things are shaping up. mixed picture as far as the indexes are concerned. for the up, doc down, cac up. somen in oil and banks in areas of europe will be interesting to watch. yes, you mentioned the oil and gas companies best-performing on the stoxx 600. up a .5% at the moment.
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on that historic opec deal over the weekend that has driven oil prices higher. nejra: you are seeing airline suffering on the flipside. index on thethe concerns for airlines of that entire -- affecting oil prices. keeping a close eye on the banks. on to the past is not the only is not thei paschi only one gaining. there will be no extension to the deadline for the overhaul. the bank has said it will step up efforts to win investors for a debt equity swap. it hopes to seek more retail investors to avoid the government possible backup plan that would impose losses on bondholders and cause concerns not just for monte dei paschi but for the political spectrum. down 2.8%.
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acquired a strong interest in getting a deal, which would be value-added. thank you very much indeed. our next guest says there is strong demand in properties in the asset class. extraordinary levels of pricing are being achieved. let us bring in management see cio, russell chaplin. where do yield go next year? it is difficult to see purity you are starting to see interest-rate rise, especially in the u.s.. interest rates rise and then you see pressure on property yields as well, so not seeing quite as much of that in europe at the moment, but there is potential for that to come. guy: when you think about --
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sorry, matt? are: i would just, you focused on commercial property, but as far as london home prices, the most red story on story on the bloomberg is the worst slump in the last six years. how do you square that with the most solid idea that more people want to put their money in real assets? russell: sure. i think the central london office, sorry, residential market, is particularly sort of special, i suppose. it is used not just for people to live in but by people around the world as an investment. what you're seeing in the residential market at the moment is just a reflection of the uncertainty that there is globally. the residential market in london market exposed to the across the globe. we are seeing that at the moment. that is a reaction. guy: to pick up on the theme of
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as yount asset classes, mentioned, u.s. yields are rising. i would love to know what kind of average yield is in commercial property right now in london and whether or not i could they, you know what, i'm theg to buy u.s. assets by treasury and get something that is pretty comparable. russell: so, it does not waste follow. the u.s. and u.k. mesh it does not always follow. the u.s. and u.k. are often in think. rates rising in the u.s., earlier than we are seeing happening in the u.k.. the u.k. has peculiarities at the moment with the referendum that just happened. any uncertainty was generated by that. the u.s. has its securely are these as well with the election of trump. we'll see property yields across the u.k., slightly lower in the u.s..
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as that gap gets eroded between the treasury' an the u.s. yield, you start to see pressure andaluesies -- treasuries the u.s. yield, you start to see pressure on values. 5% on talking down about average. expectations for next year, they will fall a similar amount when you look at the consensus view at the moment. matt: russell, we talk a lot about uncertainty in the markets, but isn't there some level of certainty since the referendum? i mean, we do know, don't we written is not going to have the unfettered access to the single's market that it had in the past? willll: certainly, there be a change relationship i suppose with that you and it is the project that we don't know exactly what that change relationship is going to be at themoment that causes uncertainty. as we look forward to next year
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and the year after, i am certainly expecting to see continued levels of uncertainty. as things start to become more uncertain, that new relationship will settle down. -- become more certain, that new relationship will settle down. we will see what that means for the property markets. we have seen reaction in the central london market office with concerns over on the investment side and occupational side. are companies going to be taking same amount of space? relativelyng to be slow moving over the next couple of years and that change relationship should slow down and property markets find their own level. guy: that is talk about liquidity and what happened in that period post-brexit where we saw -- it is by definition a very ill-equipped market and liquidity was being guaranteed in a way a could not be. how much scrutiny do you think the regulator is going to be putting up on the sector and how
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much of a discount do i need to maybe apply as a result of that? russell: i think the regulators are right to be looking at what happened in june and july. there were lots of different approaches taken by different fund managers and also, i think it is important to remember that whilst these theme identical on seem identical on the surface, they are different. the aim really here is to make sure that the customers were treated fairly throughout about period and that is what we sought to do. guy: one more question as we look away towards christmas. one of the things we are focusing on is how many deliveries turn up on our doorsteps on a daily basis. are we going to see a change in the structure of many funds as we maybe take out a little bit of real estate in london? maybe focus more on distribution
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centers on the link? -- the like? are we seeing a shift in where the value lies? russell: it is interesting to see how that is changing. i think probably that biggest influence is on the logistics market. we are a big fan of the logistics market at the moment. that seems to offer good value. the retail sector, probably too many shops and we are starting to see shops taken out of circulation one way or another and probably too many offices as well and we are starting to see this converted into residential. definitely not enough residential. that is the place we are focused at the moment. if you go across the u.s., you find up to 25% of the pension fund portfolios in the residential sector. here, it is close to zero. that is going to be a big growth sector. matt: thanks very much for joining us. i appreciate your time. russell chaplin, cio of property. they do a big business, what of
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the biggest in that sector. up next, the london bubble deflate. more on the house in question that i alluded to. right move talks about housing in london coming down. worst december in six years. will i finally be able to afford that flat? this is bloomberg. ♪
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matt: this is the european
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open, looking at a dark shot of the city of london. nowhere near any place you would want to live. london home prices are having their worst december in six in crimead by weakness areas in the capital that is likely to persist into 2017. the data coming from a website, showing asking prices falling 4.3%. joining us now is right move director sam mitchell. forve not lived in london over a decade, but back then, sw1 was the only acceptable postcode for proud ex-pats. even bankers have been pushed out of the chelsea area by prices. are they going to be able to move that at any point in? >> it is very difficult to say. august the, central london is having a very difficult time at the moment. there was a lot of legislative centralthat affected
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london. i don't think you will see prices come down dramatically. we are predicting that in prime central london, prices will come down 5% or so. you are seeing weakness in westminster and chelsea areas and around camden. if you look further out in london, we are seeing prices increase and the country looks fairly robust. in terms of whether the banks will be able to buy in chelsea or not, i don't think it will get dramatically easier, but prices will soften at the top end of the market. matt: how do you square with this -- brexit has people concerned about the future of london as a banking center. at the same time, sam, we see people wanting to put their money into real assets, as everything else seems fairly fully valued right now. how do you square those two ideas? sam: i think it is very difficult but let's not forget,
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the property market is bigger than london. when you look at the u.k. as a whole, it is fairly robust against the post-brexit. at november as an inflection point, we have seen the amount of property coming on the market in the u.k. increase by 2%, sales increased by 5%, so actually, there is a fairly robust property market across the u.k. and we are seeing money flowing out of central london into the commuter belt and regions of outer london. liverpool was a big cities -- prime london is being affected. we should be clear this is not a brexit thing. we have seen when the government changes the rules, a cleverly got rid of the slab system. the talk that boosted the market a little bit but acted as a brake on proxies. the changes brought in 3% on
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second homes and that is going to weigh more heavily on london. it is clear to us that the overall fundamentals of the market and supply and demand in the u.k. are looking remarkably robust. there was a lot of nervousness in october when the house data came out suggesting weakness, but that was based on the data acks came out and l three-month of actual sales. toshould not be a surprise anyone. it is always week in december. guy: you alluded to the spread in central london and the home counties. it has been narrowing. how much more do you expect to see? are thought of london will include by 3% overall, 2% overall. so we will be narrowing, -- guy: so our prices going down in london and up outside?
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i'm talking about the commuter belt around. people are leaving london and not going that far. i'm wondering what the inner london, outer london commuter belt kind of transition looks like. sam: when we look at the boroughs of london, the seven most boroughs have a difficult time. thee prices are below that, outer london commuter belt, surrey, for example, prices will remain fairly robust. you are seeing a lot of investments moving further out. whether that is people buying properties to live in or invest in because they don't want to be hit by the 3%. guy: what does surprise look like -- supply look like in those places? sam: supply is up 2% and there are proxies available. we have one million properties to choose from. it is demand which is looking softer than it has been. guy: there is plenty of demand coming in elsewhere and no
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shortage of that? there was a suggestion that we are seeing a slowdown in the supply side of things as well. sam: it is looking reasonably healthy actually. to be fair, it is the demand side that is weighing on that sector. people are tending to move further and further out. the problem with prime central london has been in place for some time. guy: it is not a brexit, but attached thing. tax it might take -- eight -- thing a tax thing. guy: you have to look at the given problem. sam: they are saying it is the biggest in six years, but they went down 4% in 2012 and we saw on a massive impact on the market. you so much. obviously, a fascinating topic even for those of us who do not live in london. rightmove director general sam mitchell there talking about what is going on in the real estate picture. up next, everything you need to
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pay attention to this week. it is all about oil today. italian banks, the fed, and the trial taking place in france as madam lagarde details next. this is bloomberg. ♪
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matt: welcome back to the european open. saudi arabia has signaled it is ready to cut oil production more than has been previously expected. cameurprise announcement after russia and other non-opec countries promised to reduce output in january. oil jumped to its highest level. russian energy minister told bloomberg's annmarie hordern that political support was critical in getting the deal through. important role has been played by the ministers, but i think the key role should be given to our leadership and i would like to especially note mr. putin's role here who has been very supportive of the deal and pushing us forward in understanding the importance and need. >> and having this political support, which i just spoke about, as has significantly helped us to put a very trustful relationship with our partners from opec and non-opec countries and especially the country of saudi arabia, with which we have a long path to walk together. annmarie: are these non-opec
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cuts genuine or natural declines? >> i have to say the situation is different as to go country by country, but i was very pleasantly surprised to see so many countries respond to the invitation by opec and russia to participate in this deal to help the markets. most of the countries which joined and it is very important to say the joint -- they joined voluntarily. most of these countries, they would be taking active measures to reduce production and that is very important. annmarie: what about the remainder? who is going to make up to get to the $600,000 a day target -- barrel a day target? >> the dogmatic 600,000 barrels the only possible result for us. that will be countries would join the arrangements and they would be different, and most likely, we would be able to achieve a production decline
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higher than the 560 which we spoke about today. another key thing which i would like to highlight is that the agreement is open for other parties to join, so this time, there were 11 countries here, but there may be others willing to join who were not able to participate today. what is important is that the doors are open and a decision has been made and we now have a framework to act jointly. russian energy minister. we are walking something else today. the imf head, christine lagarde, stepping back into the spotlight. of failing toused prevent the big government payout business tycoon, back when she was france's finance minister. conan jointaroling -- caroline connan joins us now. definitely aas detraction from her job in
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washington, d.c., especially if she has spent a lot of time in paris at the court of justice, but under french law, she is innocent until the verdict. until then, her job at the imf is not on the line. the imf ordered has been supporting her all along. she was named for a second term of five years at the head of the imf a few months ago and in june 2011, she was named the first time to read place -- replaced dominic. the arbitration case had already been opened. the case, they expect, to 2007, when she was finance minister under president nicolas sarkozy. she had accused the french state she sawuding him when his stake in the german sports brand adidas in 1993.
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it ended up being sold a year later for double the money he was paid. is accused ofrde negligence in arbitration case and that resulted in paying him more than 400 million euros in compensation, including interest . christine lagarde has denied wrongdoing all along. she said last night on television that negligence is actually a non-intentional charge and we are all negligent at some point in our lives. if she said she was confident and determined heading into court today, and she has received no orders of president nicolas sarkozy who was supported by the business tycoon bernard tapie. christine lagarde is expected to arrive here around 2:00 p.m. french time. she will be just behind me in this first chamber, the court of
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the republic, that also includes some lawmakers. thank you so much for joining o us on that. of course, the big event of the week takes place not in france but in washington, d.c. i have a great chart from the bloomberg that shows the real fundsunds rate -- fed rate, minus inflation in blue -- compared toite -- the unemployment rate in blue. this chart goes back to before i was born, 1971. you can see that inflation -- sorry, joblessness -- took a up. takcik -- tick we have fed funds at the lowest rate it has ever been with the jobless rate is low. guy: amazing.
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some records around the job market. matt, still more to come. it is surveillance, up next. they will be talking to the nigerian petroleum minister. i am going on radio. this is bloomberg. ♪
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francine: pushing oil to 60. saudi arabia signals deeper cuts. we speak exclusively to the russian oil minister. government by gentiloni. he starts building his team. and is renzi's return on the horizon? and trump considers tillerson, the exxon mobil ceo, for secretary of state. good morning. this is "bloomberg surveillance ."


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