Transcripts For BLOOMBERG Countdown 20160509

A warm welcome to countdown. Im anna edwards in london. Anus im manus cranny and by i suppose there is only one thing from rock my region to your chart. Anna lets talk about whats happening with the oil price. How this has rallied since february, wti oil rallying more than 70 from the almost 13year low reached in february, rallying now, really based around the canadian fires, the fires raging and although to alberta. There are other factors at play. We have seen a big shakeup at the top of the saudi Oil Administration. Is something that anyone involved in the Oil Industry Needs to be aware of as well. Manus it does indeed. That whole conviction trade about what happens with ali willimi, how much hardball they actually play at the next opec meeting . This is what we will touch on throughout the show, which is that change in power, that change in tone. Will there be a change in tone . Will they push you ran ira to get on boardn . Board . To get on anna you can see the couple of stories we have been talking about. 45. 52. Shanghai composites down. We will talk more about what is happening with the export and import story and the foreignexchange reserves as well. All of that is having an impact. Dollar yen in there. The Prime Minister talking about how japan still has tools to tackle it. Crude prices on the rise. Knocked out canada more than one Million Barrels per day. Fires are straightening threatening to spread. A provision protects companies on contracts that would go one fulfilled their control. China reported more stabilization and exports as well as a backtoback gain in foreign reserves. To 3. 2m 7 billion trillion in april. Three of the worlds most influential Bond Investors they say the u. S. Central bank is on course to raise rates. Gross, Mohamed Elerian are warning. Will appear with memories of wartime leader Winston Churchill with the speech aimed at persuading his fellow countrymen. In a speech, he will say britain has a fundamental National Interest in maintaining common purpose in europe. It requires british leadership and for britain to remain a member. Greece returning to the center stage today. The imf will assess whether the country has done enough budgettightening commitments. Throughrnment pushed tax reforms. The finance minister will review whether to release the second installment of greeces 98 billion rescue package following a sixmonth delay. Global new each day, every day, powered by 2400 journalists in 150 news bureaus globally. Back to you guys. Anna and manus. Manus thank you very much. Lets talk about the markets high. High. Kets revisit some risk. Loss. Y twoday what is driving this, the reserves or the importexport numbers . Great question. I would have to say the import numbers. Exports basically became in line with expectations. It is not just april. We are looking at 18 months that imports of actually fallen. To your other point, shortterm trade, that is a big decline at the moment. This piece of data simply reinforces that april was a bad data month. Manufacturing numbers start to the month, new trade numbers coming out. That is why you had a bigger than expected surplus. Imports excel 10 in dollar terms. 2. 3 , underwater at the moment. Asia is looking like this. Cant remember the last time it was as mixed as this. Put it all together, regional benchmark is a little bit higher. Down to the session, india, hong kong, over in japan. You guys were talking about this earlier. Dollar yen, so much weaker today. 1. 07. We heard from the finance minister and we have heard this before, that japan has the tools to intervene in the markets. The reason this particular comment is important is because he is basically the guy who decides to push that button on intervention, finance ministry. Basically, currency trading just went up at the moment. We are still weaker there. A fairly stronger dollar story this monday. The slip that we saw following the jobs data, dollar index, that seems to be in the rearview mayor at the moment when you look at how trade has panned out. A quick check out oil prices. Quite a big pop. We are getting a pop on oil prices. The dollar is relatively strong as well. 45. 50 right now im crude. Sectors,ome across flat here. Cyclicals down 1 . Iron ore, getting hammered. Down about 6 . That is roughly the daily limit. I would say sentiments are still quite shaky in asia. Anna thank you very much, david ingles in hong kong. Lets get more details of the saudi story. Saudi arabias oil minister says he will stick with a policy. The Worlds Largest Energy Exporter continues to defend market share against higher cost of shale. Will promote was promoted to oil minister over the weekend. It is great to have our guest on the program. How will the oil policy change under the new oil minister, if at all . Think you already said it. It wont change. He issued a statement yesterday saying they are sticking to their policy of protecting market share as opposed to trying to beef up prices by cutting production themselves. He was theing head of aramco. He was saying that this is the policy. He thinks they should stick to it. He was part of the decisionmaking process to get to that policy in the first place. Manus you and i have touched on a couple of different words, continuity being one of them. People we have spoken to suggests he will play a little bit of hardball. Do they want to play harder ball at opec . Why the change . Of harderink in terms ball, we have seen them play hardball. Aimi negotiated with the venezuelans and russians on possibly freezing production, excluding iran, the deputy crown prince is seen as somebody who is close to him who then said no, iran has to be included. I think the change really is more about the changes in all saudi arabia in terms of the management of the ministries, not just the oil ministry, ill ministries, more transparency, moving the saudi economy away from oil dependency. 70 of revenues are still oilbased. More towards one that is reliant on investment income. Anna even ali alnaimi wants to move into technology that is for chemicals economy. Lets talk about the other changes the saudis have made. It is the new Central Bank Governor. What changes can we expect there . Riad the Central Bank Governor has come out with a statement. It is steady as she goes. Let what the saudi government has to deal with increasingly is the decline in reserves and the need for renewed borrowing. The plan is to go to International Markets to borrow more money. The new governor is going to be a part of that process to try and make it as smooth as possible so saudi arabia can be successful when it comes to markets, just as qatar is planning. Anna thanks for a much for joining us. Hamademade riad joining us. Great to have our next guest on the program this morning. The changes around the saudi administration, oil, the wildfires in canada, all of that putting oil at the center of things this morning. How is it impacting on the things youre looking at . Theres definitely a force of impact on oil prices. Further into the commodity efforts block, which is mainly canada, norway, and to some extent, let me take a step back and say it is not really these stories that have sent the oil price higher. Ittty much, you have shown in the chart. The market is becoming very much bearish in china. Now over the past two or three , there has been some stabilization. Anna there is the demand story. Vasileios absolutely. I think the market became essentially bearish on the demand side of things. From that perspective, now coming back to more of an equilibrium level. Manus good morning to you. Manus here. When i look at the performance in the emerging market currencies, to what extent i mean, it is about oil. You say it actually is not. There are other factors at play in canada, norway, but when i the ruble is oil. Is still inextricably linked. It is a question of whether we can sustain these kinds of levels, isnt it . Vasileios sure. I think well, if we cant sustain these levels, it will depend to a large extent on valuations. At these levels, i dont see the valuations being stretched. As a matter of fact, and in line with pretty much what we have had since the second half of 2015, the dollar went simply too far. Really extreme, overvaluation levels, mainly against the 210. Atetheless, even when i look on the whole, although it is a bit of a dangerous game to treat emerging markets as if they were seven or 10 years ago, nonetheless, when i take a birds eye view, i dont see misp ricing and fundamental misalignment. Anna stay with us. We will pick up that conversation in just a moment. John, a formeris economic adviser to saudi arabia. Great to have you on the program. We want to hear from you this morning because of the changes we have seen in saudi over recent days. What you make of the changes in terms of Oil Administration . Does this yield any change in policy from saudi arabia . First of all, it was much expected. The good thing is they appointed at the helm of the oil ministry a restructured oil ministry, which includes different portfolios. Because itellent basically tells the world that the person who has been educated and been involved in oil policy is going to be at the helm of actually creating this oil policy. There is no change whatsoever. It is going to be market share. Saudi arabia will be very keen about that. I the world says, listen, will be pushing for more production, saudi arabia will say, i will do it has well. I will meet you halfway and we will go after market share again. This is the key. Manus market share is the key issue. It is also the key issue getting the iranians on board, perhaps the number one issue . Please tell me how opec affect the oil freeze. Nobody seems to be able to give me an answer. Right now, saudi arabia is saying, listen, iran, you will pump as much as you want. We can easily produce one Million Barrels anytime you want. We are going to go for market that the current minister of petroleum has been saying. As he set correctly, vision 2030 is key. Nocrats,intment of tech people with portfolios that will be delivering this important vision if at the end of the year the vision is not delivered, i can easily see people leaving. I can easily see the shuffling of cabinet ministers. Basically, they are telling their own people that these people are accountable to us and society, and if they dont deliver, we will change them. More aboutd us a bit the vision 2030. What are the Key Developments you are looking for . Definitely, they are going to do something about fiscal discipline man raising nonoil revenues. This is happening read saudi arabia will see fees, indirect taxes, all these things that will help diversify the revenue side of saudi arabia. Of course, the goal is a lofty one. By 2020, we heard saudi arabia will raise 100 billion. This is a lofty goal to me. However, it is basically telling the world, listen. We will not just rely on oil. As we are doing this, we have appointed new people who are responsible to delivering at the same time. We will be going into tourism. We will be going into minerals. We will be doing the things that will help us leave this dependency on oil. It has been there for too long and now we will try to do it. Anna thank you for joining us. John sfakianakis. Stays with us a little longer on the program. Here are your highlights for the week ahead. An emergency meeting over austerity measures for greece. Nebraska holds its republican primary. The house of congress will vote on the impeachment of president rousseff. Andbank of england decision the inflation report. Ending the week, Consumer Debt appeared coming up next, shanghai stocks slump as the trade date disappoints. Back, anna welcome everyone. Markets in hong kong a little bit firmer this morning as they have been in japan as well. More of that in just a moment. Focus on the market is a little bit. Stocks in shanghai are headed for the biggest twoday loss in 10 weeks. Disappointing trade data. Industry producers, companies. We have stephen on the case. Take me through the numbers. It seems this has swung the equitys story. We are getting mixed single signals. Terms for experts, they are up 4. 1 , the second month in a row that exports pit picked up. That gave clues to stabilization , again following the distorted month we always get in february and march. April, up 4. 1 . That is positive, right . Not really. It is distorted by the depreciation we have seen yearoveryear in the yuan. And helpsxporters boost numbers. If you look at export figures in dollar terms, they fell 1. 8 . Both of these numbers were below expectations. On the other side, though domestic demand story, imports both in dollar and yuan terms fell more than expected. We were expecting a gain in yuan terms for her they fell for the 18th consecutive month, really showing domestic demand story is hurting continually. It is not necessarily stabilization. It is perhaps more of the same that we had feared. That is why the market was selling off of it. Anna thank you very much. Lets get back to vasileios. Lets talk about the headwinds facing china. Trade data not going down well with investors. To comments coming out of the peoples daily in china, talking about the original sin of high debt levels. The chart shows the mounting debt levels for the chinese economy. Credit blowout from 2008. What concerns you about china . Which side are you on . Vasileios i think theres definitely a lot to be said about the accumulation of credit. There is no question. We have a serious longterm structural issue as far as debt is concerned with china. Is, when is this thing going to start blowing out, and how is it going to be treated by the chinese authorities . In terms of timing, nobody really knows when it is going to happen. I do have confidence in chinese authorities and the way they have been handling things. Y seem to have quite theres a lot to be said about whether they have actually put on what has been happening. Having said that, i think the fiscal stimulus that was implemented earlier this year stabilizing the economy from a shortterm perspective. Media more longterm, i do have my worries of debt accumulation. Manus we have a job for you, the fx reserves. I love the phrase you just used, waiting for it to blow up. Ofis almost a cessation attack on the reserves at the moment. Is that temporary, in your opinion . Think that what we have been seeing over the past three or four months is some stabilization and throat slowing down in the pace of fx reserves. There is a fundamental case about china in the sense that these outflows are going to remain in the market for the year to calm. Come. It wont disappear. The question is, how will this be handled by china, and to what extent, the factors are going to play out . So far this year, the weakness in the dollar has allowed for some breathing space because it has been a larger weakness story , which has enabled them to keep the dollar china picture relatively stable, but make no mistake. The story is going to remain there. Sooner or later, we are going to have some appreciating pressures on dollar china. Anna how does this weigh on other china other countries region . This is just on todays trading session, under pressure as a result of what is happening in china. Shortterm, iin, think people can find all sorts data,ails in the especially imports from hong kong. You are clearly getting a sense of overinvoicing there. , suspect in the shortterm currencies are going to be under pressure. , thisets not forget weekend, we are getting the usual rush of important data. Retail sales in china and all that. The market is probably going to be on the sideline as well. Anna ok. Manus thank you very much for joining us. Next, we will talk about the. Oros perspective on dollar yen what does that really mean . Anna welcome back. You are watching countdown. Shot rio where shaad. The kingdom will probably continue producing crude at near record levels. Khaled alfalih took over from longstanding oil minister ali alnaimi this weekend. China has reported a modest stabilization in exports as well as a backtoback gain in foreign reserves in almost two years. It rose 7 billion to 3. 2 trillion in april. The data suggest the economy is studying amid growth. Three of the worlds most influential Bond Investors are signaling the u. S. Central bank is on course to raise Interest Rates even after poor april jobs data. Bill gross, Mohamed Elerian are thinking there could be a move in june, despite the u. S. Adding 160,000 jobs last month. That is shy of what had been projected. Era area and imf. There was a debate in the greek parliament. The government pushed through tax reforms. The finance minister will review whether to release the second installment of greeces 98 billion rescue package following a sixmonth delay. The new mayor of london has promised to work for all communities in the city, saying he celebrates denver city. The French Front National leader in donald trump there we have it. Of0 journalists working out 150 news bureaus around the world. For more on the top stories, go. Y type top back to you. Manus lets talk about crude oil. Canada. Wildfires will take out about one Million Barrels a day. What does the market make of it . Their estimating the cuts are an equivalent to about 40 of canadas oil production. We have earned some producers are declaring look what is happening to wti. I rallying for a fourth day. Holding above 45 a barrel. Below 46. The wildfires in canada are having a big impact on the price. , oil ministerhad in saudi arabia, that we just heard. Minister is likely to chase the record crude output. It really looks like these days in crude are being driven by the wildfires in canada. Looking at asian stocks, the index is pretty much unchanged. Gains in japan. Chinese stocks, looking at the shanghai composite, headed for the biggest twoday loss since the end of february, heading for their lowest close since march 11. A lot of the losses over 2. 4 at the moment. It is about the disappointing trade data we got from china over the weekend. Chinas imports of copper slumped in april from a record the previous month. This is driving the copper price to its lowest in almost a month. Copper down almost 1. 6 . Extending its worst weekly slide since november. They arest is saying in a largescale correction after the recent rally. Finally, want to show you dollar yen. The yen weakening against the dollar. The dollar posted the biggest weekly gain since november. The bloomberg dollar index is pretty much unchanged today. You are seeing three of the worlds most influential Bond Investors warning against counting out a june rate increase. That could be having a bit of an impact on the dollar yen trade. Some are saying the yen has reached its peak against the dollar. Last week, it hit 1. 05. We are at 1. 07. Anna, manus, you have a chart on dollar yen that will tell us more about this. A japans money supply some investors say it signals a weaker yen. Dme do it the soros chart ub it the soros chart. The chart, itheck has risen by 96 . What we have here is the white line, the Japanese Monetary base. You have the turn on the dollar yen. Ubs with say it is difficult to see in the face of such monetary expansion. An explosion of monetary power. The yen can continue to strengthen. This goes back to here. Japan isnetary base of relative to the u. S. , it is the highest since 2006. It is that more of money, in many ways, people are talking about. It is that relationship. Traders dubbed it a ratio, the soros chart. This is what george soros predicted in the 1990s. Such a slush of yen that to the yen could do nothing but reverse trend. It is a huge debate. The one thing that caught my eye this morning is that leveraged funds, the net long positions on criticaln, that is the point. There you go. George soros, never knowingly in the fx conversation. I wonder what his bets are on dollar yen. I would love to know what he has on this trade. If helets ask vasileios buys into it. So many people talk to us about things that should weaken the yen. The comment overnight once again from the japanese government, designed to weaken the yen. What can they do to weaken the currency . Vasileios so many moving parts in here. Thatnk my broadview is following all these problems, whatever it is you want to call and it movedeakens below fundamentals, meaning it was heavily undervalued against the dollar. Basically, these huge monetary expansion, they are adding a backstop in order to keep the yen from coming very rapidly towards their value, i. E. Appreciating against the dollar. Now, obviously, you can come up with a lot of arguments about the state of japans economy, the harm the stronger yen is causing to exporters, but, you monetaryome point policy expansion has taken place. Things are changing. From that perspective, i think we are going to trade between 1. 07 and 1. 10 before the end of the are. Anna thank you. Stay with us. We will get your thoughts on something in just a minute. Evoking memories of winston aimed at in it speech getting fellow countrymen to vote against brexit. He is due to say britain has a fundamental interest in staying to avoid conflict between european countries. Course, the fifth of may elections out of the way. Brexit is all we are going to hear about in the u. K. Context. Vasileios that is all that matters right now and you can see that. We have a widespread weakening in the pmi, construction ring construction. People are getting worried about the upcoming referendum. The way i see it in terms of sterling, i see it as a binary event. I thinkio sterling strength is going to be big for the second half of 2016. One, it is undervalued. Secondly, i suspect that we are going to have quite a rapid repricing of the bank of england rate hikes. Having said that, if we get a leave vote, i think we are going to have a big pressure on sterling, largely because since the eurozone debt crisis, the u. K. Has been a safe haven for a lot of portfolio flows. These things do tend to reverse quite rapidly. Theyre going to put a lot of pressure. Manus obviously, the suggestion is that we are undervalued. The second half traded higher. I have a poll for you. The british bulldog. This is our own brexit poll. We thought it was 20 , up to 22 . Look. If sterling is undervalued and if the poll is correct, what is the upside on the table . What is the upside on euro sterling . Well, if we do get a remake vote, i think easily over the next 6, 10 months, it could gravitate toward 1. 60. Eurosterling, there to save the value is those are twos evan closer to 70. Having said all that, as far as eurosterling is concerned, one important element is what eurodollars going to do. I think the dollar will remain on a week footing. I suspect a convergence in eurosterling would be much slower. Takes us nicely into the next topic, the fed. You mentioned what the dollars going to do. Disappointing payroll number on friday. I was interested, bill gross of pimco talking about how he thinks the fed may still increase in june, even though Market Expectations are so low for an increase in june. He says this chart i have on the right is the key. This is average earnings. Youre on your change. Creeping up, perhaps. This is going to be the key. It will put pressure on yellen. Vasileios 100 agree on that. That is what the fed is looking at. I dont think the payroll report on the hole was disappointing, largely because the average earning growth came out a touch higher than expected. Inflation and wage growth is exactly what the fed is looking at right now. So, from that perspective, the fed hike ease on the table in june. From another perspective, the question is whether this is going to be communicated with a rapid, aggressive future of fed rate hikes. How soon are these going to manifest . From that perspective, our guiding principle has been, whether the guys will hike in june, whether they do in september, whether they do one or two this year, it is irrelevant for the Exchange Rate market because it runs way ahead of fundamentals and real rate differentials. ,y bottom line out of this unless the fed signals a very cycle, ie hiking cannot see how the dollar can sustain current levels. Anna thank you very much for joining us. Good to have you on the program this morning. We have covered a lot of ground. Vasileios gkionakis joining us. Going to the polls in the philippines to choose a new president. The hotly contested election has seen the mayor touted as the favorite. Our Southeast Asia correspondent has Haslinda Amin reports. What is the latest on the election . Well, seven hours since voting started. There has been no incident and that is significant in a country known for election violence, but we have had a lot of incident with broken machinery. We are hearing lots of incidents failed topeople have find their name on the voter registry. As you indicated, the frontrunner is donald trump in the united states. He has said that in order to bring down the primaries, he is willing to kill 100,000 criminals. Such comments have indeed taken the markets by surprise. Look at how investors have pulled out of the market. Performer inorst asia in april. The index is down about 10 . Remember, in 2015, it was one of the best performers in all of asia. So, 54 million eligible voters coming out to vote for the next president. He will dictate the route, the path forward for the country. Anna what is at stake economically here . This is a country that commentators have looked to with excitement, especially as the Growth Engine of china. It has people looking for other growth stories in asia. What are the candidate saying on the economy . Beennda the theme has investors, going at about 6 for the past six years, thanks to president aquino. Issue is whether his successor can continue to build on the economic momentum. There are some reservations. If you look at the list of we have an andperienced politician, there are concerns that even if she were to win the president ial investors want continuity. Whether that will happen or not, we will have to wait and see who the eventual winner as. Is. Anna thank you. Haslinda there. Manus . Manus coming up, the wildfires spread. We look at the impact on oil production, prices. The full story two, on countdown to come on countdown. 1 49 a. M. In new york. 1 . 8 of double nickel. 6 49 in london. Lets get you to the business flash. Rishaad, good morning. Rishaad weve got saudi arabia reportedly signing a threeway listing in new york, london, and hong kong. We are hoping exxon mobil will take strategic stakes with the expectation that they will lift as early as next year. Has a value that could reach 2. 5 trillion. Maybe increasing to 118 million worldwide. The biggest safety crisis in the history of the auto industry. The expansion may result in 6. 2 billion of additional cost. Lowr wont have long to settle in wont have long to settle in. Rba admitted they probably missed the bottom of the core inflation target this year. Disneys new shanghai theme park proving popular even before the official opening. It has pulled in tens of thousands of fans. Forey is opening the resort the growing middle class. That is your Bloomberg Business flash. Back to you. Anna thanks for a much. Crude prices are on the rise. Wildfires in canadas oilproducing region knocks out nearly one Million Barrels a day and it is threatening to spread. How will higher fuel prices affect the Aviation Industry . Joining us now is a managing director, robert. Great to have you on the program. We know the conversation about the aviation sector and the oil price. Lets talk about where you think oil prices are going to go. You are from canada. You have some insight or views across what is going on there. Robert great question. I had to speak a few weeks ago in miami at a conference in part of my speech was talking about the forecast. What the Market Makers and the u. S. Energy information is talking about over the next eight months, we are looking at a spread of 34 and 44. En here we are, 45. We are now at the upper end two weeks later of the recent forecasts. We looked at more. We looked at all of the Market Makers. Where we are today, of course, the airline business, fortunes fall where the price of a barrel of oil is. The Global Airline index, if you look at that, it tracks incredibly well as stock prices are goingmeans rices down, and vice versa. We are expecting a little impact. If Oil Prices Stay below 55 a barrel, we should have no problem absorbing the higher cost. Manus good morning. Typically, we see airlines do a great deal of heading, but in the lower environment, 60 from the lows that we saw in the first quarter. How do you think the airlines are going to handle this . Are they going to pass all of the boost back to the passengers . Are they able to handle this . Where is the critical point for the airlines . Is it 50 . Is at 60 . Goes, as far as hedging we have started to see airlines and april believing we have seen the last of it in the market. Starting to get into elongating oil in 2018, 2019. It is the usual question. A lot of airlines did not pass on savings from lawyer lower oil. The airlines will argue that the Airline Model has had to change over the last five or six years. Base fares can be maintained in a more competitive yet, but oil price savings are not being passed on. They do tend to go up, and youll see perhaps a little bit of a change on airline base fares. Overall, the airlines are going to find a way to rationalize the prices. Anna one of the interesting, strategic, structural changes taking place, moving away the model from shorthaul into longhaul. There is question as to whether that will bear fruit for so many years. We have Airline Testing across the atlantic. Robert we have one of the biggest longhaul markets in the world still looking at summer. 12 is the increase year on year. 6 increase year on year in the summer of 2015. A bigger block of airlines, global alliance, they control 72 of the market. That is dropping every year by 1 or 2 . To your point, lowcost carriers, groups are looking at westjet of canada. Iceland air of 31 . Norwegian air in the longhaul operation out of ireland, 51 . Lufthansa,t unit of that is driving their growth. The competition that we have been seeing from these big blocks are starting to see some cracks from the lowcost carrier competition. Manus robert, lets try and talk about it from my perspective down here. We have results tomorrow. Beefing up the Management Team at hogan. U. S. Airliners against the gulf carriers, and the eu as well, they just dont want competition, do that . Robert no, they dont part of the problem, the emirates, and european carriers, in europe, you have been under attack from longhaul fullservice carriers from the gulf region and then within europe with the rising cadre of lowcost carriers. It is still going on. Carriers, what is it mean in terms of subsidization . The gulf carriers have a lot of indirect subsidies. In the meanwhile, the gulf fly things like chapter 11 bankruptcy. Anna thank you so much for finding the time. Robert kokonis. We will take a break here on countdown. Up next, we talk about what is going on in the gold sector. We also get german factory orders. Thats next. Oil is on the rise. Knock outin canada around one Million Barrels a day. Shaking up. The kingdom replaces ali. Lnaimi with Khaled Alfalih the new oil minister. He promises to keep pumping in a bid to break the shale producers. Channeling churchill. David cameron prefers to evoke memories of the wartime leader as he presses the chase for keeping britain within the eu. You are welcome to countdown. Im manus cranny. Edwards inanna london. Lets get to breaking news. We have strong numbers coming out of the german factory orders bouncing in march by 1. 9 on the month. That was compared to an estimate of. 6 . A very strong number. Typically volatile numbers. I am sure economists will drop equation. E it seems the domestic demand has been falling away and orders from outside the eurozone surging by 6. 2 . Unlike Previous Data releases on germany were we have seen the domestic story holding up in the face of sluggish chinese growth and a weakening global picture, here it is a complete plan completely different set of circumstance. Weaker at home, but a stronger picture coming in the export market. Whoses a come country third biggest trading partner is china. The growth story very much pegged to what goes on in china. Mind, talking about chinese data and the like, oil prices this morning, lets look at the risk radar. Manus . Manus we have a change in terms of ali alnaimial out. Falih in. 1. 6, 1 . Out canadian production, takes nearly one Million Barrels of oil out of production. Canada is slightly off stream. That is pushing the nymex crude trade up 1. 6 . Keep an eye on shanghai. The trade data did very little to invoke any optimism. Chinese stocks, of course, dropping. The shanghai composite heads for the biggest twoday loss. Do you challenge george soros . He says the money supply has risen by 96 . Dollar yen simply cannot continue to trade higher. What happens next . Anna indeed. The japanese finance minister fired another verbal salvo against the currency overnight. They still have the means to intervene. Lets see how all of that changes for the european trading day. Where does it mean we will open around the European Equity markets . It looks as if we will be stronger. The asian handover, pretty lackluster. We will be stronger here in europe. We are factoring in much of the u. S. Sector on writing. We are expected to be stronger. The strong number in germany, we will see what that does to german estimates for growth. Rishaad joins us. Rishaad take a look at the crude prices. They are on the way up. Wildfires in canada knocking out more than one Million Barrels of production per day. Threatening to spread as well. 66 declared on the region. This protects companies from liability. Saudi arabia will probably keep producing crude near record levels. This is coming up as the biggest exporter sticks to its policy of defending market share against higher cost of shale. Took over from the longstanding oil minister ali alnaimi this weekend. China has reported a modest stabilization in exports. Backtoback gain in foreign reserves. The worlds biggest currency rising 7 billion to 3. 2 trillion in april. It suggested the economy is studying steadying. A mouthpiece acknowledging the risks associated with the buildup of debt. Person said high leverage is the original sin that leads to risks in the Foreign Exchange markets, stocks, bonds, real estate, and bank credit. The country needed to face up to nonperforming loans. David cameron and his appeal to using wartimele leader Winston Churchill. He will persuade countrymen to vote against a brexit in the referendum. He will say britain has a fundamental National Interest in maintaining common purpose in europe to avoid future conflict between european countries. That requires british leadership and for britain to remain a member. We have 2400 journalists working. Find more stories on the bloomberg at topgo. Manus thank you very much. The very latest. Lets check in on the markets. Lets get to david ingles, standing by. Two very different worlds. Chinese stocks dropping. The rest of asia talk us through. Dont think i remember the last time asia was this mixed. Have a look at your first point here. Shanghai composite. Shenzhen is much worse. The biggest twoday drop in over a week. 5. 5 . You see every single sector is down. The index is approaching these oversold levels. One thing to remember about shanghai, it is not a typical market. Typically, when you get the index falling, you usually see an immediate bid up. Bid up asoes not get quickly. It is something to keep in mind. Asia is looking like this. The bag is fairly mixed. Overall, most stocks are on their way up. We are getting pulled down by these energy numbers. Japan, australia, south korea closing shop at the moment. The markets are fairly mixed. Shanghai, forgot to mention the trade data that came out on the weekend. Exactly in imports, not it does not exactly bode well. Keep in mind we have had a fairly disappointing day so far from china. The exception is the forex reserves. Weak dollar story, anyway. Pmi data came out, not as good. Import data, very bad. You could make an argument that way. Risk appetite, they are not exactly at the idea level. India in lows. Keeping things afloat in asia. One point 4 . Mixed. Strong dollar. Oil was on the way up. It is actually looking much better in than the headlines suggest. David, thank you. David ingles joining us in hong kong. After we heard from saudi arabia over the weekend, the new oil minister, the wildfires in canada, lets bring in our guest, peter. Great to have you on the program. What do you make of the moves we have seen higher in oil prices . Wti rallied more than 70 from the oh most 13year low reached in february. Does this deal sustainable to you, or do we head back down at a moments notice . The outlook for Global Growth is still fairly challenge. I think what is interesting about what we have seen since february is if you go back to february, and i think i was on your show at that time, we noted that the forward price was actually around 48. Was,eakness in the price to a great extent, related to technical factors. A lot of speculative sourcing. Now we have seen a reversal of that. We are now back i think the curve is coming back substantially. The question is what happens next. Frankly speaking, i dont think theres a clear case for either it rising sustainably from here on, necessarily, or falling sharply from here. Manus you sit on the fence . Nobody gets to do that we have a chart for you. It is the imports from chinese fromis on the story yesterday. This is rising. It is a nice move. It is kicking the trend. Dollar,ing to be the the chinese story, or the saudi policy that affects the next move . China,on the subject of it is clear that there is some source of cyclical recovery underway in china. I think you still have the very severe structural headwinds, which may well impact the country for a number of years to come. But cyclically, china is recovering. The marketsting how always tends to focus on exports for china. They always say that is the best indicator of what is going on in china. Rubbish. Imports tell you how much demand there is within the domestic economy. The import growth a year ago was 20 . It is now getting close to zero. There yet,y or but we are getting close. It will continue and there are signs that it can continue. Dealthat provides a great of order for the global economy. I am not sure enough to send oil prices that much higher. Anna where do you stand on the eurozone growth at the moment . Germany factory orders in march. Exports picked up. It seems there was a bit of a domestic demand falling a little bit, orders for outside the eurozone surging. Getting that kind of a boost to the german economy. It is a very volatile status. Where do you think the eurozone heads . How firm is the recovery . Peter it is the big, overweight position within the equities exposure. Continental europe. The reason for that is very simple. The European Economic cycle is cycle ier than any than, say, the u. K. Or u. S. Falling three years ago. Elsewhere, it started falling 6, 7 years ago. 10. 3 , i think, in europe. It still has an awfully long way to fall. Balance, ithat on think you will continue to see these economic numbers. It will probably surprise on the upside. There is another good example of that. Anna thank you very stay with us on the program. Manus lets change gears a the 6 bit and talk about drop in earnings for the first quarter. Producer largest oil blamed it on a decline in the price of Kevin Crowley joining us from johannesburg. Anglogold is up so far. It is coming up from a low base. What is driving the rally . Chiefly, gold is up 20 . Helped anglogold. In the country in which it operates has really dropped. Us trillion dollar. That has really the australian dollar. That has really helped margins. That is why we have seen a blowup in the share price this year. Manus of course, you know, gold on that 1300 level, saying this is the relief they need, but there is still a target taking cost out of business. What do you think of the days results . What was the main take away . Kevin it was a mixed bag, really. The output was a bit lower than the same period last year. There was construction at some of the key minds. The costs were down about 7 . They were sustaining costs, ounce, whichr compared to the current gold price, 80 an ounce, it is not too bad at all. Outputintain the guidance on the cost guidance for the full year, so i think they should be quite happy with that. Manus talk to me about there is one of the mines in the not be overrun, by illegal miners. What does it mean for the company . How are the handling it . Will it come to an end anytime soon . The situation is disastrous and it is deteriorating by the day at the moment. They placedne that a limited operations on about a year ago because the costs ran out of control. So, they have been trying to come up with a development plan. In closing it down, it has been completely overrun by illegal miners, as you say. The company is accusing the ghanian government of not doing enough to maintain security. I have to see this morning what it means for the future of the company. He did not really want to say. He says we need to just get in there and secure the site, and see what the damages before we can make any sort of estimate at all. The company has actually taken to thenian Government International court of arbitration in the u. S. The situation is so dire. We will wait and see what happens there. Manus kevin, thank you for a much. Kevin crowley in johannesburg with the very latest. Anna coming up on the program, shanghai stocks tumble. Trade data disappoints. We bring you on we bring you the latest on the worlds secondlargest economy. Thats next. Anna welcome back. You are watching countdown. 8 19 if you are watching in frankfurt. A little stronger at the start of european trading day. Stocks in shanghai are heading for the biggest twoday loss in 10 weeks. That is disappointing trade data. Commodity producers and Industrial Companies are tumbling. Us now lots of data to sift through. What are the numbers telling you this morning . Good morning, indeed. We are getting a mixed bag on the numbers, really. Trade data was not especially you could argue it is adding to the stabilization story out of china. It certainly is not adding to any turnaround story. We had an interesting article on the front page of the peoples partysthe communist mouthpiece. It is getting a lot of attention. Talked about the risks to chinas economy, pumping of growth depending on leverage and death alone. This article was written by an authoritative person who is unnamed. Depending on leverage alone. This article was written by an authoritative person who is unnamed. This article is showing the trade data i think that peace is talking about the original sin of debt. Lets talk a bit about the current data we have seen as well. We have seen china not burning through the fx reserves at quite the pace it was. Does it suggest stability . Of an impact a bit there. The headline is the ability. Step away from that. There is a currency valuation impact there. They are getting very lucky, of course, because of what is happening with the dollar, in terms of the direction the dollar has been heading this year. Of course, even as the flows have eased, the flows are still happening. Look at the hong kong import, chinese import data from hong kong, the numbers over the weekend. They surged about 204 . Even as it stabilizes, even as the you want stabilizes against the yuan stabilizes against the dollar, industry says they will weakenthe yuan over the year ahead. That brings us back to the reserve story. Stability for now, but no one thinks this flow intervention story is going away just yet. Anna thank you very much. Is still with us here on set. We spoke briefly about china. Lets return to that subject. The fx reserve data stabilizing of it. Flows continue. Are you reassured . Peter not particularly. Mentioned the Structural Forces that have been driving chinas economy and will continue to drive chinas economy. Whether china is cyclically recovering or otherwise is kind of irrelevant. Chinary about whether will be able to smoothly make this transition from a very assetoriented economy to one that is more oriented around consumption, more oriented around services. It is extremely difficult to do. If anybody is going to do it, then a command economy like china has probably got more chances of success in that it can basically tell people what to do, companies to do. It would not work in a western context. It is going to be tough and the jury is still out. Manus one of those tough issues is that issue referred to, the article. Originals and let me show you what it looks like. It starts here at around 160 billion, the equivalent in terms of debt. It explodes all the way up to where we are now. That is the unimaginable issue. The manageable issue on the global context, what makes you think the chinese can manage it without any contagion . Peter well, as i said, i am not sure i am saying they can manage it. I am saying that i am not sure they are going to be able to do that. I completely agree that these levels of debt, whether you are looking at china or other parts of the world, are at levels which are very clearly unsustainable. Put the chinese numbers in perspective. You have to put them in the perspective of chinas foreign reserves, which are extremely trillion. E region, 4 you have to put it in the context of the fact that chinas Financial Sector is very distant to media this intermediate it disintermediated. It goes through the banking system. Look at the bank lending numbers in isolation will be a bit misleading. I suppose the bottom line is, what would the banking crisis look like in china . I think it probably has a better chance of that being fairly well managed than elsewhere. To the original sin and how we needed to see the signs of the debt crisis in china, clearly not hide it, which is an interesting thought. Moving on to what we have heard recently from the fed and what the data is showing us, we hear willthe officials that it be datadependent. We got the date on friday. We hear from the fed official, two hikes this year still sounds appropriate coming from one official. What do you think the fed is going to do here . Peter the data continues to disappoint, whether you are talking about the u. S. , or japan, or other parts of the world. That this isty is the world we face at the moment. Growth is at a much lower level. There is a number of wellrespected economists who talk about stagnation, whether it is due to demographic forces, whether it is due to things like wealth and income inequality, which has reached a very high levels. It is a strain on growth. I think we are in an environment where on balance, you would expect Interest Rates to stay lower for longer. Anna teacher, thank you very much. Ston joining us for the past half hour. Nice hire. Ave a london, paris, frankfurt all rallying higher. This is the driving force. We will have a nice bump of the open. German data did us some good. We will do it all again tomorrow morning. Manus will come to on the move. We are counting you down to the european open on this monday morning. Im guy johnson, alongside Caroline Hyde in berlin putting peace at risk. Said to have is escalated his campaign, by warning the isolationism will be to conflict. We have his speech live in 30 minutes. Has greece done enough . Finance ministers will hold