tv On the Move Bloomberg February 1, 2016 2:30am-4:01am EST
guy: welcome to "on the move." we are counting you down to the european open. negative rates. what is happening out in japan? it is all beginning. jonathan: china's official pmi signals a record six straight months of deterioration. equity markets fall and the commodity rally falters. crude reality. nigeria in talks for a $3.5 billion loan from the world bank. sores -- soars and
announces and 800 million euro share buyback program. it expects full-year profit at the upper end of its forecast. guy: another busy day, another interesting week in prospect. lots of corporate reporting numbers this morning. lots of macro economic news as well. let's get the bloomberg first alert news with caroline hyde. caroline: china's official factory gate signaled a record six month in a row of contraction. the official services index also fell while a private pmi survey signaled the industry shrank for its 11th straight month. slumps in the wake of the chinese data. nigeria boost
production for opec. leftesident donald tusk the meeting with david cameron late last night, saying there is no deal yet. the pair have instead agreed to postpone by 24 hours the publication for a template of a compromise plan. hsbc will impose a hiring and pay freeze this year. ceo stuart gulliver outlined a three-year plan to pare back a sprawling global network by eliminating jobs. that is as he pushes to improve earnings. back to you. .uy: thank you very much indeed we are 27 minutes away from the european equity market open. fairly mixed.
asia was fairly mixed as well. shanghai down, took up -- tokyo up. paris is negative and the dax is rarely flat at this stage. u.s. futures looking negative as well. a fresh record low yield. jonathan: not just in germany, but in japan as well. the japanese 10-year yield, a yield of six basis points this morning. all time low. silly in thetting bond market. the copper price down by 1% this morning. manufacturing in china sliding to a three-year low on the pmi reading overnight. the euro in a really tight range. guy: payrolls friday. it will be interesting to see
how that plays out. we will think about that one. central banks, despite the fact that we have no major meetings in february, are going to be front and center. first europe, now in japan. the negative interest rate that has sently the japanese curve towards record lows. the 10-year is very close to a negative rate. nearly half are now negative. compare that to germany. 70% of the sovereign bonds are now negative. it has impact not only on central banks, investors, banks as well. hearing from the ceo of julius baer. we will get that interview cut, spliced, and diced. talk to gabriel.
he says negative rates are here to stay. do we understand the implications of that if that is the case? >> not really. us totoo new to allow gauge what it means. a couple of years ago, everybody knew that interest rates cannot go negative. if they go negative, they could not go more than .5% because everyone goes into cash. cash.is no rush to negative interest rates should spur banks to lend so that they or requiredies reserves. that is not happening. we do know that negative interest rates work on the currency. that almost certainly is what the bank of japan is taking about -- is thinking about. possibly combined with we have to do something.
this is something. we have to do that. that was a long answer. the short answer is we do not know exactly how it plays out. jonathan: do we start talking about the cost of storage? it is not even that. the cost of storage is important. remember, the cost of storage is relevant for banks if they were to move into cash. bloomberg is not going to move into cash and suddenly start holding millions of dollars, euros, yen in its different offices all around the world because the costs would be prohibitive. there are things you cannot do with cash. you can go down and buy a pint of milk. if you buy a maserati and pay in cash, you would happily have someone asking, where did you get this money? it is not just the cost of
storage. it is a convenience. it is the security. i am beginning to think that the rush for cash is a red herring. we might see a rush into other assets that we think are likely to keep their value. chart of the bank notes in circulation in the eurozone and it has gone up. probably a red herring. this is a chart that has been inclining for quite sometime time. in terms of how you should ,nvest assets at the moment what do negative rates mean? do they mean that you hold more physical cash? do you hold more cash in your assets? >> it has meant that plenty of people have decided to buy relatively low risk, high quality equities. that is one of the implications the authorities hoped would be achieved. we need a significant
distinction between the climate in the eurozone and what is going on in japan. japan, there is an absence of demand tomorrow. a negative rate is not going to achieve anything. we do not have businesses that want to borrow. in europe, negative interest rates will drive borrowing because consumer sentiment is on the rise. gabriel, jump in, please. gabriel: i would agree with you. but in the eurozone, the acceleration in the growth of wrought money, which is more important than credit, but also in the growth of credit, started well before they cut interest inus. could minus -- to m they accelerated the broader credit growth in the eurozone and credit growth is still weak. james: but it began in april
2014. the quantitative easing started in march of last year and the negative interest rates were june of last year. it would help a little bit, but it is adding a tailwind. i still think the impact is likely on the currency. we talk about the implications of the policies in the u.s. quantitative easing took the fed interest rate from the equivalent of -3% to 0. will we see them hike their rate? are we going to see the u.s. moving to negative interest rates? that is a huge question. jonathan: what do you think the chances are? gabriel: i think it is reasonable if we do not see economic recovery. i worry that the fomc statement was still very domestic in focus
and not enough about the global economy. i would rather see the fed have a greater focus on what is going on in the big world, particularly with regard to u.s. oil. about -- jonathan: james bevan and gabriel stein are both going to stay with us. coming up, another conundrum for china's policy makers. we look at what new pmi data tells us about the state of the country's economy. 20 minutes away from the open. futures around europe pretty much dead flat. ♪
lower-than-expected earnings after a settlement with the u.s. over american tax dodgers and weaker client activity in the second half. hsbc will impose a hiring and paid brees this year as part of its drive to cut as much as $5 billion in costs by the end of 2017. stuart gulliver outlined a three-year plan to pare back a sprawling network by shutting money-losing businesses and eliminating jobs. ryanair has announced an 800 .illion euros share buyback at the same time, the budget airline said profit after tax increase to 103 million euros to the end of december. that was below analyst estimates. >> after the buyback program, we will have given back $4.1 billion to shareholders. as long as we continue to be profitable and have cigna can
cash in the business, we will look to do more buybacks. thanks very much. china's official factory gate signaled conditions deteriorated for a record sixth with pmi falling to a three-year low in january. what exactly does the data tell us about the state of the chinese economy? does it tell us anything new that we did not know already? >> good morning. it is a pretty negative news coming out of china. basically, the economy is still weak and has not seen signs of improving. also, inamed on manufacturing sector, theervices government is pinning a lot of folks as a way to win the economy away from exporting and
manufacturing this service is gauge also dropped, which bodes ill for both sectors of the economy. does today change anything when it comes to expectations of further policy stimulus? >> it puts the government in a dilemma. they can try to ease monetary policy in order to stimulate growth. if they were to do that, they might spur greater unit depreciation, outflows, something that they have been trying to manage. it is a difficult decision for them. the other side might consider a fiscal stimulus, maybe expansionary fiscal policy. that also carries with it a great deal of risk, particularly 's the debt side, where china
total debt ratio continues to climb. jonathan: thank you very much for joining us today. let's welcome in our guests, james bevan and gabriel stein. , on friday, there was a line that caught my attention. the bank of japan makes a move. cny-r as the currency pair jpy is concerned, it increases they willhood that make a move. what do you make of that argument? gabriel: there is a risk that we will have localized currency wars in asia. i do not want to put a percentage risk on it, but it is there. i do not think we will have it globally because the federal reserve and the bank of england don't -- are not as concerned about their currencies as the others.
that is actually beneficial for the world. the issue for the chinese is that, in the case of japan, they need the week -- weak yen. for the chinese, that is not necessarily the same case. as greg was saying, the weaker yen will spur capital outflows and you get a vicious circle. they are trying to control that. it might not be quite as straightforward that the people's bank is further. there will be some easing. will we cut rates? perhaps not. i would be more concerned about other regional central banks trying to match the japanese move downwards if not necessarily into negative. the moves that we are seeing from the central banks are going to generate growth -- find curious to know how you think of this in relation to oil. james: if you were talking about
commodities, i would say that copper has failed to rally before oil. seen such low manufacturing pmi data coming out of china. it is the overhang that we saw in the boom. think there is a risk that if the pboc gets the rnb to fall, the debt that was taken on during the great boom, that is going to be quite painful. and capital outflows from china $1.1year reached about trillion. that is a huge number and needs to be watched carefully. , whato copper, oil happens with growth here? is it the short-term? how does it work in terms of
what the objective is? it is managing inventory run off, we understand that. globali do nothing the growth is going to be as bad as people suggest. i do not subscribe to the view that we will have a global recession. i am not going to stick my hand up and say this is dreadful, we need a lot more growth in the system. growth is patchy and uneven. i think we will get a shift in the oil price in due course. so a weaker dollar and stronger oil are two things that will have to move hand-in-hand. jonathan: if we are not going to get this global recession, what do you see happening in china and manufacturing. ofixth straight month manufacturing pmi declines. where is the bottom for you? gabriel: if i knew.
our view is that things will turn around or cease iterating at some time by midyear. true thattainly is the risks to the world economy are skewed to the downside. having said that, i agree that there will not be a global recession. those fears are massively overblown. we are in a state where all news is perceived as bad news by markets. they want to see bad news. that can change at the drop of a hat. jonathan: let's cross over to caroline hyde for your movers. higher, here in london, and in frankfurt as well. on thee: significantly higher side is ryanair. even though they missed estimates, we have seen them give money back and we are seeing continued growth. ryanair earnings doubling other earnings in the fiscal third quarter. that was 103 million euros, just
shy of estimates. nevertheless, 800 million euros of a share buyback. and the decline in jet fuel prices getting a bit of a boost. mainly on the upper side of calls coming in for ryanair. also being higher is bt. the biggest broadband provider in the u.k. pushing into mobile and pay-tv. they are still managing to woo the clients when it comes to their internet product. shares slightly on the downside. look out for this french company. with thell to do company supplying oil and gas companies. no wonder they are hurting. they are having to fund restructuring in europe and
brazil. they are raising one billion euros partly in new shares. keep an eye on julius baer. could fall on the back of a miss. guy: thank you very much indeed. james bevan and gabriel stein still with us. reported numbers. how damaged are they going to be by this dollar that we have been talking about? james: we should have seen a 10% hit. we have not seen that because of cost containment. i am quite positive. years, we will get two 5% of s&p 500 rates. this translation effect from the stronger dollar
to the bottom line is fascinating. hedged, 95% of 62 by dollars -- $62 a barrel. it is getting diluted somewhat even if it does benefit the company. they have huge amounts of volatility. because of their cost efficiency, they can make money when others do not. jonathan: james, what do you take of that? do you take the broad-brush approach to equities? the devilry is in the detail. one has to understand the global positioning of the company the profit. the prophet -- at the same time, you have to be on a momentum strategy as well. guy: do you think that the virgins is going to be the story of 2016? gabriel: i would hope so.
yes, the dollar will go higher. guy: how much? gabriel: i don't have it in my head, but i will say that it is our favorite equity region, eurozone followed by japan. the u.s. comes way below. guy: because of the qe story? gabriel: rising interest rates, profit drivers dissipating, high valuations. you look at the situation in the eurozone and japan, you have everything going for them, including potentially positive growth surprises in the eurozone. jonathan: gabriel stein and james bevan. about 4.5 minutes away from the open. we are talking about the potential for a stronger dollar. the probability for a right--- a rate hike. it is not all that obvious. guy: it is not that obvious. the market priced in an awful
jonathan: good morning and welcome to "on the move." guy johnson has your morning brief. guy: following factories. chinese pmi signals deterioration, equity markets fall in shanghai. crude reality. loania is in talks for a in the african development bank. the message with other countries. a budget airline sores announcing a buyback program with for your profits at the
upper end of the forecast. jonathan: 15 seconds away, higher across the board. a session high going into the european market. caroline hyde has the touchscreen. caroline: that rally we saw could continue european stocks today, focused more on the stimulus coming from japan rather than the negative repercussions of manufacturing in china. chinese stocks fell on a three-year loan for pmi manufacturing, a japanese stocks did manage to gain on the back of that warm wind from the bank of japan. cac 40 up ashteing the well, moves on the equity market up. remember, we have manufacturing data across the eurozone and u.k. later today. will that continue to fuel optimism here in europe, as we
are expecting growth across the board? the china fact is being felt in other areas. metals training lower, copper off after we saw a manufacturing slowdown, service is not getting as much as they had previously. we're also seeing the demand side of the equation, so too d oes the supply side of the equation because we are seeing oil lower after opec is ramping up their supply. let's have a look at gold. there is a bit of risk aversion, money continuing to move into bonds. we are still seeing these fields push lower, global sovereign bonds at the lowest borrowing cost in 12 months. yields come down on the u.s., on france, continuing on the tenure side of the trade. let's have a look at stocks to watch. some earnings coming in, thick and fast. upnair up, managing to ramp
profits. s up, wooing sale sup in the broadband potential. vallourec could plunge on the open, a guest service company money,s to raise concerns being hit by europe and brazil restructuring. jonathan: thanks very much. how does asia trade? a fairly mixed session. haidia: after a terrible january, it was a continuation of that rally that started on friday when the bank of junapan another add to the 3% rally we saw at the end of last week. exporters are getting a boost,
the yen staying close to a six-week low, giving a nice boost when it comes to the electronics and automakers. we did have the other piece of news during the day, the drive for china's pmi. the official index dropped to a three-year low. we did see that play out for the aussie dollar. a bit of a proxy for the chinese slowdown. down, though it had been up. we had korean stocks keeping of 1%head up by 7/10 despite horrible export numbers. has put pressure on the yuan as well. korea, the export oriented requirement, something of a canary in the goldmine when it
comes to the global slowdown. the additional easing coming through seems to put further downward pressure on the competitiveness of south korea. 1%,hai down by 8/10 of driven lower by the steelmakers, really these old economy stocks that continue to go through a difficult time. let's take you through the movements. ccountp, really on a of james bond and adele's "25" beating expectations. on the other end of the spectrum, japanese lenders take it on the chin. they're really seeming to be the biggest losers, in this new normal. they will be charged for holding onto deposits. jonathan: haidil lum.
four minutes of the session, dax opening higher, the minutes rolled on and the decline set in, dead flat on the session. here's what's happening in today's program. . tax program roads profits, and brexit talked in overtime. prime minister cameron extends negotiations as an agreement remains elusive. and nigeria is in talks for a $3.5 billion loan as the oil slump fax their finances. guy: we need to talk about julius baer. the ceo of switzerland's wealth management company spoke to manus cranny in the last hour, his outlook for the company in
the future of private banking. >> we believe that the market will continue to consolidate, our industry will be producing m&a opportunities, working with some reserve. at the same time, we are seeing investors are continuing to like dividends. we're increasing dividends, and ,e think we have a new guidance given the payout ratio guidance, which i think is something that the market wanted to hear. that's taking into account the opportunities that may surface in the m&a space. manus: let's talk about the opportunities -- here domestically, give me a sense of what kind of deal you would like to do. union, what is the kind of institution? >> ideally, in the perfect
world, we would look at the portfolio that is diversified, that comes from different areas which are compatible with hours. asia, middle east, europe, switzerland. ideally, something of large-size. i think if we make an acquisition of $5 billion to $10 billion, it becomes more of a rounding error than something that will change the size of the firm. ideally, something that has gone through regularization, that ha s left the negative behind. manus: the japanese have joined the negative world -- how destructive is that to the client? how negative of feedback? >> it is a new concept for clients to think that keeping their money with their financial is to should, they be -- with their financial institutions,
they need to pay you. well have seen over the last 12 months is that you can engage the client. you can talk to him, try to mitigate that negative interest rate by increased activity. jonathan: boris collardi. james is still with us. double-digit cash at the moment. are they wrong? >> i do believe they are. tactically, how they raise cash while the market was high, that would have been reasonably impressive. strategically, i think equities remain cheap. variances of performing the index by five percentage points today. i think there a chance we have passed the capitulation point. we have that intraday spike down. if we're to get positive forward numbers, we could look back and say that was the bottom. jonathan: on what metric are they cheap? >> they are cheap in terms of
premium against bonds. it's my expectation of the bond yields remain low. jonathan: so this morning, when headline crosses, the dollar does negative, new record lows. that tells you to buy equities? that is a continuation of a relative trade? >> absolutely. low bond yields mean three things to me. the greater capacity for companies to control their capital, opportunity for capital expenditure, and for consumption to be justified. thirdly, valuation basis of equities. jonathan: 10 years at five basis points in japan and 50 in germany. , and ifn will below , you want asset prices to appreciate you have to depend on the central bank -- >> absolutely not. what's predictable is that you
focus on quality growth. there are many companies continuing to grow revenues and continuing to grow earnings. you don't have to be dependent on central banks, which are wholly unreliable. they have to be able to do the right thing to run an economy, not telegraphing investors what to do next. investors the the fundamentals and i would pay that could apply to a lot of companies with excellent prospects, reliable cash flow. those of the company's investors focus on. jonathan: the market -- you look at what is happening here -- the market bounces and we have seen the ecb generate it, the broad market -- x years of qe, still talking about more, not getting global growth in the way you would have asked acted, considering -- you would have expected. seems to be looking for central-bank swans again. >> i completely endorse your are very central banks
much in the frame to getting the global economy moving, and doing that is an error of judgment. i would say that we need two things. more fiscal spending, and that might sound heretical at the moment and thinking i thought government had to spend less -- right now they need to spend more. second, we need to see structural change. we are crying out for structural reform. italy stock market was done really well on the back of committed were structural forms. jonathan: james, james, james. the italy stock market did well because of structural reform? nothing to do with qe? relatively well because of that commitment to structural reform, absolutely yes. jonathan: james bevan. if you disagree, you know where to find me on twitter. up next, brexit. tossedameron and donald
up 15 minutes into the session. let's cross over to nejra cehic. nejra: thanks. china's official factory gauge signaled six months in a row of contraction. the official pmi fell to 49.4 in january. chinese stocks have -- oil slumped in the wake of that chinese data as figures show kuwait and nigeria helped boost crude production from opec, exacerbating a global glut. prices fell, snapping a four-day advance. hiring andmpose pay fees as part of its attempt to cut costs by 2017. in june, the ceo outlined the year plan to pear back a sprawling global thanetwork as
he pushes to improve earnings. guy, jon? jonathan: thank you very much. nejra cehic. tvid cameron and donald usk failed to reach a deal and hans nichols has been following developments. hans, the reporting out of the u.k. newspapers this morning is a little mixed. some people are calling it a win, others a loss. knowing can make up their mind. hans: well, that conflicts with the german newspaper report, which isn't covering it, because they are much more concerned about the refugees. here's an updated. . another 24 hours of negotiation. heading out of that meeting, or heading into it, they were all smiles. a picture here with quite a bit of flash photography, capturing moments. they basically got an extension
-- 24 hours -- to try to get through this so-called a few mechanism, this trigger mechanism. do you have the ability for member countries outside the eu, the eurozone, to apply the brakes to something, and how can they do it and when can they do it? the british press in particular has a fair amount speculation that you could be is to a deal. tryooks like mr. tusk prid to for cold water on it. "no deal yet, intensive work in the next 24 hours crucial." if you end up getting some sort of agreement at the leaders meeting, then you could potentially have a referendum in u.k. june 23 is the day a lot of people are sort in on their calendars. i still think we need to get through this summit to see wh at mr. cameron extracts -- does
he bring the centra french aboard? there continues to be confusion in berlin about what his strategy, goals are. he may have a chance to clear that up. he is heading to hamburg later this month, giving a speech. guy. guy: hans nichols, thank you. let's bring in james bevan. james, hans outlining the negotiations as they continue -- we have his spirit with uncertainty leading up to the referendum, regardless of what the result is. as an investor in u.k. equities, how do you approach that situation? >> as long as i can buy decent quality growth, i am much more concerned about the outlook. that has been a significant dependent on to buyers -- the bank of england's quantitative easing and then of course the nondomestic buyer, who's regarding the u.k. as a safe haven in stormy seas.
the brexit issue must worry international investors, were they to leave en masse. i put a low probability on the outcome. jonathan: the last few days, barclays says the u.k. will become a safe haven in that scenario will stop hans was mentioning the migration story. could it be a force in the storm? wille period of change create substantial uncertainties and i would not expect of answers to jump on day one. that said, if one goes back to votes of a similar nature, they don't tend to worry until quite close to the vote day. jonathan: in terms of the equities, it's the big international names headquartered in the u.k. that are making a lot of noise. if you want to invest in that
u.k. growth story, the smaller that aree equities most at risk. >> it's an interesting challenge. the names most at risk are those that export exclusively to the eu, because there is a risk of a constraint and their capacity to do business. they shouldplayers, be relatively well-off. jonathan: if you saw that revaluation of equities that had big export exposure to europe, most people expect the trade deal to get done anyway. if you were to see those prices drift lower, when you see them as interientry points? >> i would. i am looking for entry points all the time. the context of a very low cash rate, low bond yields, low inflation will be likely to rise. in core inflation is not quite
and as soon as., the year on year rundown of commodity price is washes through, core inflation will be back up with headlines and we will have inflation and you can much closer to 2%. guy: quick question. is domestic growth in europe more valuable than export orientated growth? >> you definitely need to see domestic growth in europe. absolutely critical. jonathan: in terms of the premium you apply to the company -- global growth, if you're a company that exports to emerging markets, is that growth in terms of the premium you would apply less valuable? >> the reason you pay a higher prices because you don't have the currency risk. you'll have to pay a price in terms of currency uncertainty. guy: james bevan, always a privilege. thank you very much. we will break down a way for you.
this point -- which emerging-market countries are the riskiest? corporate leverage is one way to look at it. let's join caroline hyde for the chart that matters. caroline: is is interesting on a day where we are worrying about nigeria in terms of the selloff impact on oil. also china's manufacturing is once again in focus, but there is a great chart coming from mark whitehouse. maybe it is india we should be more worried about. maybe it is brazil. unsurprisingly, brazil is leading the chart, but corporate leverage -- the amount companies for eachwing dollar -- brazil is where we should be most concerned. they have the most abou amount f leverage. you've got continued weakening, but it is also across the board with the emerging markets having the most in more than a decade.
you have to keep on going down until you find china and turkey. maybe we are starting to worry about the wrong types of countries. if you're borrowing from a corporate perspective, brazil $1.61 of top at debt for every dollar of equity. down even lower if you -- turkeyo account and china have a substantial amount of cash. they are putting that cash to work, but it could help repay the debt. jonathan: it's a surprise that china is so low. interesting,it is given where rates expectations are. caroline, thank you. jonathan: the oil slump hits
jonathan: hello and welcome back to "on the move." 30 minutes into the session. let's get you up to speed on where stocks are trading. the dax is dead flat, the ftse also dead flat. switch of the board, we'll work through the other asset classes. the story in china, three-year low pmi. .opper is also lower the story in japan is negative from friday and it goes lower again this morning, down by five basis points. euro-dollar, so many stock stories. let's get to two of them with
caroline hyde. set off thentander board rolling in a negative way, and the rest of the lenders seem to be doing relatively well. it's really driving the top performer up today, close to the 9%. it is very volatile but we are noting that this company is getting better net interest income, doing better on the profit perspective. that was a beat, all of this being highlighted by the analyst , saying that the capital was pretty good. wear isdownside, eye up, losing their coach chief executive 18 months into the game. jpmorgan is really citing that this is throwing it back into the volatility and uncertainty range. they really feel that the co-ceo leaving just means more turbulence at the top and the
management reshuffle being announced on a day when we see the numbers not quite living up to expectations on the fourth quarter and 2015. not looking quite so pretty. meanwhile, one of the worst performers out there, up 1% to 9% -- why the fall? ,t looks like a positive one from nokia on how they agreed to a deal with samsung. they don't break down that particular deal today but they say over the next two years they should be getting 1.3 billion euros in the door. it seems to be disappointing the investor base. jonathan: thank you, caroline. nigeria's government is in talks for loans of $3.5 billion. on the heels of what's happening in countries like azerbaijan, where the imf
and world bank are looking at potential ways of helping. last week, capital controls in azerbaijan were imposed. we're in lagos. paul, give us the details of the nigerian story. finances are , with ad by oil revenue fall in prices. bankhave gone to the world and they are in talks to get $2.5 billion of loans on concession. they need this for a record budget in a record deficit this year. guy: paul, the currency hasn't pegged to the dollar for the last year. how well does that stay there? >> at the moment, there is no
signs it's going to change. the president has stated quite clearly that he doesn't want to saidevaluation full's he that it will only hurt nigeria's core inflation, which is already at about 10%. they have said that they are fine-tuning the foreign exchange ratings in place at the moment, but there are a lot of people, a lot of investors who think that the status quo will remain. goldman sachs doesn't see a devaluation for another six months. jonathan: thank you very much for joining us. for more on the oil story, let's loc welcome the global strategist at amundi.
you compare this to russia, an exchange rate that is buffering, nigeria is not getting the benefit. is a crunch time for nigeria? >> it will be in 2016, very likely, unless the price comes back. we have seen it far too many times a different countries, resisting that deval. we had azerbaijan, kazakhstan, vietnam.ola and th a flexible exchange rate is what is supporting these commodity driven countries. alexa columbia, russia, malaysia -- things are relatively hav healthy despite the drop in oil prices. guy: i guess it is about a speed of adjustments issue. if you look at how quickly the
dollar has depreciated, how quickly can nigeria adjust? how quickly can russia adjust to the kinds of shifts it is going through right now? oil revenue is not there in the way it once was -- how do these countries make money? >> if you don't have that exchange rate as a pressure valve, if you have it is almost automatic. if you don't, it will be much slower and more painful. you have gcc countries, the last block of countries where they haven't let thae peg go. they will have the same in 2016. in they jerian's case -- in nigeria's case, they may have pressures in the banking sector, but from a current account balance perspective, i think market will reward them. >> in terms of the budget -- budget, itms of the seems like they want to increase it. is that the right tactic at this
juncture? >> these are extremely political, and the nigerian economy has been slowing, was really limit their government's capacity to adjust. this would be a lifeline -- i'm sure there would be a lot of conditionality, one of which may be letting the peg go. jonathan: how does iran fit into this story? going back to the old market, still an oil market but now much broader, has all sources investment criteria -- walk us through. you have the rest of opec been crippled, goldman sachs out with a note saying that opec will not be able to do much more. >> in terms of being able to withstand the pressure from oil prices, they stand in a very good stead. population under various ,anctions for at least 25 years
but it has lived under constrained environments for a long period of time. they will not be there to the same extent as they would be in other countries. there are two main stories -- one is the oil prices, and the market would be complacent. initially the markets didn't ,elieve it and for a long time the market didn't feel a nuclear agreement will be possible. it would be too good to be true. even when the plan of action was signed, the market side implementation would be a long january 2016,in we saw that big falling oil prices. the second complacency comes in terms of how much you want to ramp up supply. when you look at expectations,
ever ranges and termite. the government is saying we will increase supply by one million barrels per day. that --manage to do jonathan: so you think the market is underestimating iran and their ability to increase output? >> there are a lot of technical reasons for why it has this expectation. sectornian oil and gas has foreign investments that will limit their capacity. i and governments have shown a tendency to surprise on the upside. jonathan: thanks for joining us. guy: global emerging markets are ths strategist. buyback,nnounces a giving the stock a boost in today's session. we break down the figures in more detail next. ♪
guy: hello and welcome back. 42 minutes into the session. let's cross over to nejra cehic with the bloomberg business flash. nejra: thanks. increasing shareholder dividends by 10%, coming as this was present bank approach to $547 million settlement over american tax dodges. the company said that net income slumped 67%, to 121 million
banks. hsbc will impose a hiring and paid these this year as part of its drive to cut $5 billion in cost. in june, the governor outlined a three-year plan to pare back a scrolling global network and eliminating jobs as he pushes to improve earnings. rose the most in the year after the company reported better-than-expected profit. it was given a huge helping hand by the james bond film and record-breaking sales of ad ele's new album. sales also helped offset losses from cell phone competitors. guy: thank you, nejra. higher shares trading after a share buyback. we spoke to the ceo about the decision earlier this morning. program,this buyback
we have given almost $4.1 billion to our shareholders, to the extent that we continue to be profitable and have significant cash in the business. we will then do more buybacks. our aviation correspondent is here. what i want to ask you -- the stock is up because of the buyback. is that what it has latched onto? >> i think they are also feeling good about ryanair costs. passenger numbers are up, and they have kept their guidance. they didn't increase toward the top of it. jonathan: the knee-jerk reaction is go to the airlines because the cost be cheaper. fuel, $60 per barrel. it's not great, but it is better than last year, and that is the key point.
>> it is definitely better than last year. in the third quarter, fuel costs for passenger were down. it will be a big tail wind into next year and the year after that, and they can compete at these levels. it's an interesting balance because on the fuel side it is great but it also puts pressure is on you. how they operate is that they are low adopted yields passive. last year after the paris attacks, there was quite a bit of softness in the market, and they responded by offering different sales and getting customers onboard. if they can keep the planes full, adding extra bags, allocated seating, they can push up what they make per passenger. guy: the currency is interesting as well, and quite significant. they are buying planes this year, and they're hedged at 117.
that will mitigate down. >> the currency -- this is true of all european airlines -- any benefit with fuel have to look toward the currency side to see if it will feed through. in terms of the cost, they are very well-positioned. they are borrowing at very low cost and the new planes are very efficient that will help them cross -- getting there that a good rate -- jonathan: the current ones are what they are getting more cheaply. >> and they are also negotiating deals and there is definitely a concern about cost creep, because they are going to her primary airport, competing head-on. they have been negotiating really good deals at these airports. i inc. they are really keeping focused on this cost issue, because it is so keys to their business. guy: there is always a
temptation to take the stock price move after an hour and decide the earnings were good based on what the stock price did. it is up because of the dime bag, and i hate to strip it back, if you look at the underlying performance, is a good based on what you thought was going to happen at this point yesterday? >> you are definitely putting me on the spot. there is a definite concern in the industry about what the yields will be like into the summer, whether there will be too much capacity. i think there's confidence that the demand is there. people are wanting to fly and ryanair is tapping into the. i would say it is generally a positive thing. jonathan: thank you very much. our aviation correspondent. guy: up next, a busy week in store. the fed and ecb. then, a thursday for the bank of england, and and of course it is
off, french manufacturing just crossing us, 50 for january. manufacturing in france is at 50, just straddling the line between expansion and contraction. switch at the board, and there has been contraction -- chinese. the pmi at a three-year loan. one of the reasons you see aluminum trading lower, rent crude off, and that commodity rally is faltering as we begin the new week, but a rally that does continues japanese government bonds. six basis points, an intraday low of three or four. that last year -- guy: i misspoke earlier when i said -- wait, hang on. anothers done has hit record. jonathan: this move keeps on coming. i think will be an interesting
week. an interesting week in terms of free thinking, or maybe not rethinking, our approach to all of this. , finals across europe for a number of countries. and you are getting the u.s. data out as well. we will also hear from draghi later on. we also have the iowa caucuses for republicans in demo crats. bank of england -- that will be an interesting day. we get the announcement, and friday has jobs data. let's think about all of this. ryan chilcote joins us. i want to start with the bank of england. tell me one of the more interesting events. the fed, markets pricing out the rate hike, markets pricing in rate cuts in the bank of england.
how does carney deal with this dilemma? how does he convinced the market that we're where we should be? havee of the issues they is that they highlighted -- i believe it was last quarterly inflation report -- concern over the strength of sterling. the more dovish tone may have taken since then is seeing sterling come off. they will welcome that, but it won't be lost on than the fact that the pound has weakened a little bit from the strong levels we saw because they took a more dovish tone. might they push back? they might, but i'm not sure they will be buying it. jonathan: jennifer ryan writes that governor carney is on track for a feat that haven't been done since the last bank of england governor never do anything with interest rates.
>> that is what investors are saying. there is a little bit is easing priced into the curb, not enough to show they are expecting it, but left off is that late 2017 -- jonathan: we still don't know how long mark carney is sticking around. [laughter] only stays for five years than it could very well be that jennifer is right and he doesn't move rates at all. guy: interesting point to shift things on -- we had this interesting dynamic between the u.k. and u.s. where the data is very similar. in the u.s. things are starting to soften. we haven't seen it in the labor markets just yet. how do you anticipate that unfolding? in the labor market it has held up, and for a lot of people the labor market is still strong in the u.s.. do the headline numbers start to soften at some point? >> i think investors are
probably looking at -- as you say, the headline numbers have been ok. certainly the unemployment is something that policymakers have celebrated, and really so. i think investors focus on the underlying wage growth, and you see that strange dynamic. they don't understand it and i think there has to be something they are missing. you look at expectations and investors have. moved to those expectations considerably lower even from december, when they were lower. guy: german manufacturing just crossed -- 62.3, not as that is the preliminary. richard jones, the data in europe is a fascinating dynamic. the manufacturing numbers out of china are ugly, and everyone keeps saying the data in europe is ok. is ok enough if you are an investor? >> if you listen to the rhetoric
from mario draghi, probably not. he was concerned about not only inflation in the eurozone but also growth rates. i would be interested -- i think it would be very interesting to see what draghi has to say, the first time since he spoke since -- jonathan: do you want soccer data because he will do more? we seem to be back there, don't we? if you look at what is areening, kuroda and draghi both making it clear that they are prepared to do more. corona has already done it and equity markets are starting to stabilize, looking for good news. that seems to be what the markets are looking for. what we would really like is more stimulus. >> and at some point bad news is bad news. mario draghi speaking in the european parliament today, debating the annual report.
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>> failing factories. china's pmi signals its six straight month of deterioration. february's long wait. the shortest month may prove the longest as investors navigate world markets. the battle for iowa. pulls open for clinton and -- polls open for donald trump and clinton. ♪ francine: welcome to "the pu