Transcripts For BLOOMBERG Countdown 20160811

I am manus cranny. Breaking news for you, thyssenkrupp, thirdquarter adjusted earnings, 441 million euros. That was a beat on the estimate of 419 million euros. The profitability does fall. You still have a chinese exporting. Thirdquarter profit fell by 18 , but it still beats the estimate. 9. 7 billion, the estimate at 10. 04. They confirm the forecast of 1. 4 billion euros, on the adjusted earnings. Credibility falls by 18 in the them,r, Third Quarter for 441 million from 539 million just year ago. Signs of recovery in the materials business. Steel made earnings of 91 million, obviously down last year of 160 million. Adjusting 39 million, so that is the state of affairs with tyson group. You have the headwinds coming hard and fast. The paris attacks, the turkey terror, the attacks in the south of france in nice. Terror is very much front and center. Thirdquarter revenue at 3. 6 million, that is down from this time last year, making 4. 8 billion. Just put this in context, turkey is about 14 of the overall revenue. They are still sticking to guidance. They see good year undermining growth of around 10 . So, they are sticking to that number, in terms of the net number. Net income for the Third Quarter comes in at 86. 9 million, that is versus last years 29. 2. This is the largest tour operator. Underlining, earnings excluding currency effects, all of the other anomalies you will see, rising 10 . That is what they are saying. Thirdquarter profit increasing by 1. 1 on that. So, letter to see if we have the numbers. You have this eric numbers. Let us to look at deutsche lacombe. Looking at these numbers and how they did, relative to the u. S. And their peers in europe. Deutsche telekom at 50. 65 yesterday. Secondquarter adjusted earnings, 5. 4 6 billion. The market was looking at 5. 45, so a little beat. Second quarter comes in at the million, so if i break these numbers down in terms of where the street is coming from, and looks like the u. S. Earnings increased 8 overall for the company, in the Second Quarter. Surging, sales of United States of america that pretty much balancing off the real aggressive provision you have in the domestic market. Topline earnings outstripping interest and the anomalies, etc. Analysts predicted 5. 45, and you have that nice move higher by tmobile usa. They raised a fullyear forecast for this of cyber growth. Subscriber those are your reports that we have. We have a feast to get through. Not germany, but the currency. In the meantime, let us in the first word news with Rosalind Chin. Rosalind we are looking at currency, looking at the kiwi dollar, a oneyear high at the reserve bank of new zealand cut Interest Rates. Policy makers lowered by 25 basis points, to a record low of 2 . But traders deemed the decision dovish, amid the global yield that was spurred by unprecedented global monetary easing. Brexit is undermining the outlook for the u. K. Housing market. With both demand and sales dropping in july. That is according to the World Institution of surveyors, saying that new buyer inquiries fell for a fourth month, while the index is pointing to the fastest decline in transaction since the Global Financial crisis in 2008. With the highest since the brexit vote, exactly one year after the shocked evaluating the nerve global markets. Join the imf after the currency in october, option traders are the least bearish in almost two years. Outlook is slowed, and the gator volatility has declined to the lowest level since november. Says it is cooperating with authorities in new york, that after the wall street journal reported the company is under criminal investigation for allegedly defrauding insurers. Federal prosecutors are examining whether valeant and the mail order pharmacy should have a relationship. Deadly wildfires have hit part of Southern Europe, as high winds fan the flames. Four in portugal, houses burned down, thousands of people including tourists. In france to multiple fires formed a column close to the port city of marseille, forcing the will to flee their homes. Privaten who wanted a audience with donald trump spent three hours scaling part of trump tower, using large suction cups. He climbed as high as the 21st floor, before officers grabbed him and pulled them to safety through an open window. He posted a video entitled message to mr. Trump, why i climbed your tower. In which he said he had an important issue to discuss with the republican residential nominee. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. You can find more on the bloomberg at top. I am Rosalind Chin. Manus . Manus let us get into those markets. David ingles is standing by. David . David good morning, minutes. In hong kong, just past 1 p. M. Here in the city. I think it is one of those days where it is important to look under the hood, because the benchmark it, closed today, but it is lower. Getting pulled down by the Bank Financials and a big mining stocks in australia. But as you can see, still a fairly decent day across some of these emerging markets. Again, outperforming, a lot of money into that market, as with taiwan up of course today, singapor seeing a pullback acros the manufacturers. Singapore out with gdp outlook, basically cutting the top part of that range, up to 25 percent growth. Days, sixfive days in some cases across the asiapacific. Taking that risk as an excuse to take profit off the table at the moment, keep in mind is still very near that oneyear high, 25 up from february. It is very easy in the foreign markets, given all the centralbank action we had today. Two of three, and the philippines are out in an hour. Markets were not impressed. Even cutting 50 basis points, the markets will look for more. As you can see the kiwi dollar, going the opposite way. Of 8 10 of 1 . The other a decision which came up today, bank of korea held onto rates. Unanimous decision was seen by economists here, the bank of governors send keep the policy accommodating, and recent strength in the currency a bit of a concern. Still providing a head when when it comes to exports out of south korea, as well as meeting the inflation target. Manus . Manus david, thank you very much. Theid ingles with a ver latest on the market. If you breathe, you misinterpreted the german conclusion, deutsche telekom, thyssenkrupp, actually beat on estimates. Strong corporate earnings just one part, sing the rally to a bull market this week, up more than 21 since february. We are joined by bloombergs Richard Weiss from frankfurt. Are back. What is the standout, versus the analyst, what is the standout versus this rash of german data that i broke the top of the hour . richard the earnings season is coming to a close. And as you mentioned , strong fundamentals in terms of corporate earnings. But a lot of the observers wish they were strong, more good earnings reports, because a lot of the other fundamentals do not seem to justify the bull market we have seen since february. The german dax up more than 20 , so officially a bull market. The Third European market to be in that status. And we are wondering, will the remaining dax Companies Reporting earnings measure up to that . Support the idea that growth is back in earningspershare, or will they look soso. A mixed picture in reality so far, and some of the indicators are not that great. Forecasters are not exactly bullish on the german economy. And we also had low Trading Volumes, meeting the bulk part of traders, investors not even participating, a handful participating in this latest environment. Earnings estimates generally the last couple of weeks after him down, however the measure of the benchmark has come down a bit, so maybe easier to beat for some companies. But the key thing here, will this be justified . This recent run in the dax, by the earnings presented . Manus let me interrupt you. For our viewers, oversold and overbought, what you can see, one of our charts of the hour, richard, going all the way back to the latter part of 2015. And we can see we are hitting i, getting that over both positions, versus an oversold position. I suppose that ties up with what you just said. That the analysts are a bit more bearish, a bit more skeptical on the momentum here. Richard that is right. And the question is, are they just observing the market or putting money in the mouth is, like the Fund Managers do who are closely scrutinizing those . Earnings this morning that will be the question. And low Trading Volume probably the best indicator, that a lot of people who had not participated in this bull market, getting nervous, should we join now . Wait for pullback . Manus well, that is the perennial question. Richard weiss joining us from frankfurt. Joining me now onset is vincent chaigneau, the head of fixed income at societe generale. Thank you for coming in. The equity story, the bond story, the overbought story in equities, all about a reach. Ultimately, it is all about a reach. In your opinion, is there more to come in that reach, in your bond markets . Vincent indeed, we are seeing that pretty much right now, an incredible force. We are seeing, as you say, a very strong rally in equities. But also in the bond world. Quite a sharp compression in france, but also in europe, the noncore market, doing pretty well. What we call the softcore market doing very well, from finland, austria, holland, france compressing quite strongly. Manus just in the middle of the break, yousef of the finnish bond, 2022. In terms of expiration, this is. 4. Just beyondust, the ecb mandate. You draw flag in terms of risk for bond markets, finland and austria. Vincent effectively, it will make the job of the National Central bank very difficult, in terms of selling the mission. They have to buy bonds, but as you know, right now, they cannot buy below 40 basis points, the deficit trade. And more bonds like this one are trading through that limit. And that meets the universe, slower by the day. And for a country like finland, our calculation suggests that in just a couple of months, the central bank might have reached the issue limit. Ecbi think the centralbank is going to be under pressure to come up with some tweaks in the program, have to change the rules quite quickly. Said the imf this morning that the ecb as less room, less room, limited room for further rate cuts. I mean, the juxtaposition is this, dropping below the current . And the world is revenging back against negative rates, where do the tweaks come . Vincent it is going to be hard. Indeed, we are not looking another rate cut. A bit like in japan, i think Central Banks are serving to understand that collateral cuts, a deepening of rates are quite large. Therefore, we are not looking for a rate cut their. Is allowhey could do. The negative basis, increase the issue limit for some of the bonds, the bonds that dont have a collective action clause. And that is what we think will happen. The market is also speculating about the change in capital allocation, more buying of italian and spanish bonds, germany buying. I think that will be difficult politically, you know, we have a very important election coming up next year. And i think that maybe will feed the antieuropean sentiment in some countries. Manus politicians do not like a backlash. We are already seeing one, possibly another one transatlantic. Vincent, stay with it. Head of fixed income. Here are some of the highlights. Initial. Time we get jobless claims of u. S. And before wall street opens, firstquarter earnings from alibaba. The European Commission is due to rule on the 130 billion dow chemical dupont merger. And the anniversary, exactly one year since china shop the evaluation of the currency. We look at the roller coaster ride. And at 6 40 u. K. Time, we discuss the results with germanys largest steel maker, thyssenkrupp. And theresa may takes a Summer Holiday in switzerland, shunning and eu destination. This is bloomberg. Manus 1 19 in the afternoon in hong kong. The hang seng trading up 131 , a beautiful shot of the harbor. It is 6 19 in london. Now, it has been a year since we yuan,e valuation of the followed by chinese officials tightening capital controls and increasing intervention. Well, the measures have eased the outflow pressures, they also showed policymakers willing to push back ambitions for the yuan to become an international currency. Meanwhile in new zealand, the central bank has had difficulty as it tries to rein in the kiwi dollar. This, despite having cut the benchmark to a record low overnight. For more, lets get to paul allen in sydney. Think that exactly going to plan, are they . Paul , not at all manus. Typically, you cut the rate, and you see the currency fall. But the exact opposite happened in the ceiling. Graham wheeler saying the rise did nothing, but nothing surprises them anymore. The reasons for a could be reluctance in the United States to ease further, possibly some expecting a 50 basis point cut to the cash rate in new zealand. Graham wheeler says that was not seriously considered. But later on, he said Central Banks are running out of ammunition, the new zealand is not one of them yet. He said it will not join the race to the bottom, and zero rates are no good. Manus mark carney seems to be singing the same hymn sheet. The syntax of the language suggests another rate cut on the way. A,l plan b is more a plan Graham Wheeler saying that 60 basis points of cuts are already priced into future projections at citigroup and capital economics, also seeing the new zealand cash rate at 1. 5 within the next few months. Graham wheeler, not surprisingly, would not comment on possible intervention. But the other thing he has the other thing he has to watch out for is inflation, tradable inflation beyond his control. The inflation targeting bank welltion, currently at 4 below the target window. So little option really but to continue cutting. Manus paul allen with a very latest on the decision. Vincent is from societe generale. When i look at this, vincent, where they cut rates in new zealand overnight, my question to you as the head of fx, does this go back to the reach for yield, in terms of the new zealand stocks going back, to you, mr. Governor, likewise, in new zealand or is this a dollar weakness story . Vincent a bit of both. You have three stories. You have the rich yield and the carry trade, and you have less concerns about china. Those three factors are making those currencies stronger, right now. We do not think this is very sustainable. We think the central bank certainly will continue to fight, with more rate cuts. The concerns about china, at some point will come back in h2. But for now, it is hard to fight. You have a very strong risk appetite, and although the extra yield that those currencies offer is not very high, it is a very large manus it always seems like to be there, in a world of zero, they are almost highyield. Vincent yes, they have cut rates a lot. And the spread to the u. S. Is compressing significantly, but for now, in this world, the rich yield, it is enough to keep those currencies quite strong, indeed. Manus you mentioned china, which takes me to our next chart. Viewers can go to the terminal, you can get it on the bloomberg. The yuan, that red area on the far right, that was the drama. Down 1. 9 , down another 1. 6 on the 12th. Do you think the chinese, there seems to be this sense of sort of contentment at the moment at these levels, do you reckon there is further to run on the downside for the yuan . Eventually, yes. But i have to say the central bank has had a much easier job this year, because the u. S. Dollar has been weaker. When the number gets weaker, the central bank can afford the yuan to be slightly stronger against the u. S. Dollar and typically, keeping the index quite low. It has been much easier for china. Manus in terms of volatility, levy to show you what i have prepared here, because this is when you begin to understand. This is about global payments. Theyre going to join the imf basket, in just under a couple of months time. But this is the share of global, beginning to dissipate, do you think the hot flow of money in, capital flow out, and that has been the overriding concern for china. Is that stymied at the moment . Vincent it was a major concern in december and january, we had outflows at about 100 billion a month. That has continued since that, but at a much slower pace. And clearly, it is on the radar of the markets. So, it is not a major concern, right now. But eventually, you have the underlying problem, that binge that we had in china, too much debt will start to hurt. And the government right now is trying to basically cover those risks, but there is a limit to that strategy. And i think both on the balance of payments side, but also in terms of the reform of the economy, what we see deteriorate is a bit of a step back. Somehow, the concerns about the currency, but at a cost of probably putting back a little bit in terms of the economic reform, and the transition to an economy driven by contention and buy services. Manus vincent stays with a. U, hads vincent chaignea at societe generale. Tonext on the show, we speak thyssenkrupp. Despite thirdquarter profits lighting, we have a conversation with the cfo of germany largest dealmaker. Syou have markets on futures, u. S. Equity markets indicating a little bit higher, futures of 1. 5 . London futures are virtually unchanged. 68. 11. Down a bit. Down one point in london. Stay with us. It is all about us. Manus a shot of the emperors alice in tokyo. Dollar up. You can hardly call that a move, enough to move markets. We have a new edition of daybreak. It is available on the bloomberg on your mobile function. Let us take a look at some of the main stories that are making news. Raging wildfires, of course the dramatic scene that is across europe, particularly the south of france and portugal. On the island of madeira, raging wildfires. Southern europe, not enough to deal with in terms of terror and in terms of travel disruption, and now being hit by now disasters. Fires. Surreal the nextdoor a we are tracking is of course, well, if you love property, this is what the things that will impact you. The Royal Institution of surveyors is saying that you get housing property dropping the priceince 2008, the rics fall to lowest in three years. Sales the weakest since the financial crisis. Many of the landlords, the marketeers came in and the First Quarter to beat the chancellors new tax, the osborne tax in terms of the market. So, that is certainly something to consider there. Then, we focus in on the commodity gains. Now, this has been obviously a relief rally. We have the oil market which rallied all the way from the deer at the start of the year nadir at the start of the year. They say commodities may wipe out the gains of 2016, later this year. That is, guess what . A final demand, that actually persists at being so. 8 ,commodity index falling entering a bull market in may. Go oil. Go iron ore. Oil never far from this mans part. The driving sentiment, stock being overbought, Caroline Hyde is taking us to the markets. Referring to oil. Caroline, good morning. How are you . Caroline i am very well. A few technical indications, because i know you are big on oil in a moment. Jey to the market. Really driving sentiment lower. But have a look at what can also be cause for thought for the equity investors, rsi. Relative strength index, i bring you on the dax first of all, a technical indicators sewing we are overbought, currently 13th. Where you start to buy, the red line at the top, 70, is a signal the previous day. The bull market, dax certificate, in the ftse 100 getting very close, if you dig in and turned the next set of charts. Getting to and deadly close to that 70 mark as well. We are at 69. 28 on the relative 5100. Th index on the is it time to sell out that equity benchmark as well . Secondly, i know you are going to be covering some of the markets moves on the back of new zealands decision to cut rates, tough luck. I am afraid your Exchange Rate is not going down. It does not affect the new zealand centralbank, look at how spiking higher it is in the kiwi. Central banks in australia as well, earlier in the week they cut by a quarter of a point, hitting record low rates in terms of bank policy. And they see the relative of strength overall of the aussie dollar. You cannot manage to push down anymore when it comes down to Monetary Policy, if youre yields look attractive. And that is happening to both australia and indeed new zealand. Bonds look pretty tasty at the moment. Positive territory. Maybe you want to buy in. I give you one other your perspective. You have u. S. Treasury being bought significant lead by foreign buyers, the most potentially in several year. 72 of u. S. Treasury being sold yesterday in the off bond auction, 72 bought by foreign Central Banks. Ramping up the positive yield. The question is, what you do once you factor in the cost of having them . Manus absolutely, caroline. If you are brave enough. Caroline hyde with a very latest. Great to see you. Saudi arabia has showed no sign of slowing down, when it comes to its crude out of it now we get to our bloomberg middle east markets anchor, yousef gamal eldin being. Oil is never far from your heart. Yousef it never is, manus. Articulate oil in this part of the world. And you know what . The latest numbers would wake anybody up. Saudi arabia pumping the highest level since june 2015. Let me give you some perspective with this chart, which outlines Saudi Oil Production at 10. 6 7 Million Barrels a day. That is a figure that was yourtly reported to opec, line in red. The bass line graph is the bloomberg estimate of Saudi Oil Production, and i have also put in the line in yellow, your wti price. You see how much pressure has been exerted. Just a few quick notes on what came out in this opec report, because overall production, 400 barrels a day in the month of july. But what is key here is that you do see continued pressure on both the demand and supply side of the equation. On the demand side, youre looking at the driving season in the u. S. Coming to an end, as we go to the Third Quarter. And the supplyside of course, what they point out is that there could be further pressure on the backs of additional rates coming online. Still a very precarious picture, but still opec sticking two guns, not really materially changing the output for demand, this year or next year for that matter. Manus yousef, thank you very much. Our middlel eldin, east markets anchor. Still with me is vincent, from societe generale. You hear caroline talking about the foreign flow into equities, talking about oil, i thought we would draw the two together. When you have here is the price of oil in the white line, that is crude. And the breakeven, u. S. Twoyear breakeven. You see a very strong relationship and an opportunity. Vincent well, what we have noticed is that the short speculated position on oil is actually very large, right now. It seems that it has been a little bit of a running into the negative seasonals that we get in the autumn, and that has contributed to the pullback in oil prices. , weelieve that in two yeras might see some short covering, and that would support breakeven on the front end of the u. S. Curve. I have to say, inflation does not keep me awake at night, right now. [laughter] but given the evaluation, for example, given the fact that Central Banks are going to continue to run easy policies, in some cases talking about the basement, typically in japan, i think i like being long and the fixed income portfolio. It makes sense. Again, not that i am very bullish on inflation. But i think that if at some point bond markets were to reverse, for that to happen quickly, but the word to happen quickly, i think it would offer some protection in a portfolio. Manus if i flipped that story into the u. K. And the gilt market, in the same respect, would you be more interested in tips and the u. K. Than the u. S. . Inflation index, as opposed to u. S. Nt usually, with the it is that you are starting to see at least when you look at core inflation, when you look at wages, and has picked up a little bit in the u. S. And labor market is getting tight. So, that is why the u. S. Is our favorite place. It is true in the u. K. , obviously with a very weak tell ing you are going to see some offshoots and inflation. So, that could helplinger in the u. K. Right now, it is hard to be long in the u. K. Because you have the very bullish momentum, driven by the bank of england. And the bull market, it tends to not perform very well. Manus let us translate to the other side of the corner, fx market. Fx currency, inextricably linked to the fx story, what i have here, nearly posturing of the rally, if i take what you said in terms of the market very short and oil, frontloading the data, that leaves us with a squeeze on her hand in oil. Translate that into emf for us. Vincent well, i think the currencies are benefiting very strongly from the strong risk manyites, the rich yields, of the currencys offering a higher yield. And also benefits from the reduced concerns about china. At least in terms of market perception, i think the risk is there, for the concerns right benefiting from all that. So it is a very mixed bag, not the same story across the market, but overall, i think it is also hard to fight that strength from the currency. Especially at a time when the weak, and iis a bit think the market was a bit shocked by that profited set of numbers we have from the u. S. This week, in terms of very weak productivity, suggesting that chronic growth might be just 1. 2 . And clearly, that is going to keep the fed very cautious, going to keep the fed on hold for longer. Manus people have to understand jobs numberst two that will make of the mind of the fed. We have more value to get from you, vincent stays with us. Germanys largest steel maker thyssenkrupp has reported profits, as china continues to put pressure on prices for more. We are joined by thyssenkrupps cfo guido kerkhoff. Guido, think is a much for joining us and for taking the time. Very comfortable beat for you. We had a nice rally. Will that continue . That remains to be seen. What we have to see and our results, longerterm contracts. And as he already had in q2, improvements in the steel sector in q3, volume and price therefore,ges, so within a result we will see. The steel market overall, prices are rather flattening. And we have not reached prior year levels. We have reached the levels reflected, so there is more to come in our results from the price i. Manus i am looking at your steel, adjusted coming in at 39 million versus a loss last year. That market also improving. How will the developer the rest of 2016 . I have been having a conversation will give us your perspective on the u. S. Guido what we see is that one, we continue to improve in brazil. And as you mentioned dropping offce, is in the u. S. Sharply, basically half of our production is going to the u. S. , so we are participating in that. That will continue through q4 as well, even though we have not felt the lag with brazil deliveries to the u. S. So the approval we saw in the q4, market, evening. Manus the hot topic is your potential tie up with tat. A. Offering you the same incentive to do this deal . Guido you understand i cannot comment on the details, but what i have to say is that brexit was for us, like for everyone else, a surprise. But i would not look at it as bad or good event, just that everybody has to adjust to it. So, it takes a bit of time. That is all of what i can say so far. Advance, saynnot you have any further advanced discussion with tata . Guido we are very said we are in talks. And that continues. Manus and the same sort of propositions on the table before brexit, still on the table . Guido again, i dont want to comment on any of the details, so please do understand that. Manus no, i think we got a message for the loud and clear. In terms of your perspective of world growth, many people are wearing that growth is the lowest since 2009. What are you seeing . Guido i think what we are seeing is a mixed picture, if we take a look throughout the world. What we see is euro, the potential growth is slightly declining on brexit, but now on the other hand, we have seen there is more kind of optimism coming back into the stock market, reflecting the possibility of a brexit is dealt with in a reasonable manner, that we will have such a big effect. What we see in the u. S. Still is a strong market, not growing as fast as it was. It isr us, what we see, still do nicely. Brazil is, and south america is still very much down. Maybe they have seen the bottom. You hear some voices that could be the bottom. And that is to be expected. But starting from a very low level, if we take a look at asia and mainly china for us, i think if you to the numbers on our elevators, we are still selling more or less the same amount of units. So we dont see the decline there pricewise, saw bit more cap edition. And it is still good. So, that is ok. On the other hand, if you take a look at the trucks sector, and worldwide, that is rather going down. And also positive, so mixed picture, but i will say it is the worst. Manus one of the elements that many people have talked about in your set of results, industrial solutions, im looking at the falling by night on 50 from last year. Is that a heavy weight, in terms of your results . What are you going to do to counter that . Do we expect any changes . One istwo things to say, clear that the benchmark is oil, gas. To a certain degree reflected. But we did see is that we had a very strong q2, and we are a given outlook into q3 that will be less, because we have final determinations of contracts that were very favorable in q2, and the distribution was not well q3, weed between q2 and had a record high quarter, so if you assess it enough to balance it out, we are slightly more or less the same as last year. Ninemonth he relation. Guido, thank you very much. That is the cfo at thyssenkrupp. We have a little bit of news coming in, this is a german retailers Second Quarter earnings coming in at 77. 2 million. Versus 25. 7 they hope to open a 200 million euro Distribution Center in poland. This is an the back of numbers. Net income of 50. 9 versus 23 million last year. Margins also widening, Getting Better margins i should say the man had, 8. 4 up from 3. 5 . They are confirming the fullyear forecast that they produced on the 19th of july. So, expansion plans afoot for the lando. Of course, stock on the 19th into july rose the most ever in frankfurt, as they raised fullyear margin guidance in terms of any concerns over falling profitability. Coming up, a break for brexit. We would all like a break from brexit. Theresa may is taking her Summer Holiday in switzerland, shutting any eu destination. That is coming up next. At 7 a. M. , one year on since the shock of china devaluation of the currency. And at full force in frankfurt, we round of germanys earnings as the dax continues its bull run. This is bloomberg. Manus lovely shot of new york city there, futures indicated up at 21 when 75. 1 51 a. M. In the city that never sleeps. 6 51 in london. A very good day to you. Youre welcome. Let us talk brexit. Negotiations hanging heavily over theresa may, u. K. s prime minister. She chose to shun the british union, opting instead to take her august break in switzerland. Per pound, swiss francs, as result of britains decision to leave the eu, falling some 11 since june 23 against the swiss franc. Still with us on countdown is the head of fixed income at societe generale. She has not gone hiking. Perhaps she is a wise woman. Vincent where are we in this great, gilt debate. Much has been made over the last 48 hours. You would still say the market wants to be, ostensibly, long. Vincent well, that first aversion from the bank of clearlytwo days ago, concerns that. It might be difficult for the bank of england to actually find the longterm gilt that they want to buy, because investors are going to take to it. And therefore, we had a powerful flapping of the u. K. Curve, with long yields falling quite sharply. And clearly , getting in the driving seat of the global bond rally. So, there is the concern about the institution of the plan. And right now, the long end of the curve, the best way for her is to be long. Manus long gilts against swaps in 15 . Vincent one trader we like is 10year. For example, we see the scarcity of bonds in the long end. Manus i have a bar chart. This just came out. Go to top bonds never look at gilt. This is the return of the bond market since the 23rd of june. And you can see there is a moderate outperformance in the u. K. Market, relative to the rest. What caught my eye down there is obvious the the negative return on the japanese bond market. Can that momentum in the gilt market, returning three times as dire, atn that ien this momentum and trajectory . Vincent we had another rash, the bank of england earlier this week, we are in august. You know, a lot of liquidity, for liquidity. I dont think that is going to be repeated going forward. So, maybe it is an overkill. But at the same time, i dont think you want to feign that rally. The bank of england is going to do more. Theyre going to cut rates again. The bank of england will be here buying gilts. Pension funds are struggling, deficit reaching a new high, so we dont want to hang on the longterm yields. I dont think you want to fight it. Maybe in the autumn, when they come up with a plan to support the economy with some fiscal easing, maybe that is when you will see some fatigue in the gilt rally. Manus a lot of people come in here and say there are many pressures on the pension fund, what does it take to actually invoke a conscience change in policy . Does it take a Pension Fund Provider to go bust . Isto struggle, going bust perhaps a reckless statement, struggling, really struggling to meet its requirements . Pensionersll, some are already struggling quite badly. And they said part is that the asset side is performing quite well, really the liability that is exploding because of that rally. Know, willuys, you get relief really when the bond yields increases. The question is, what could trigger that . But at some point, they could change. And it was very much discussed. You show the poor performance since the boj meeting. There was talk 10 days ago that we with see a shift from Monetary Policy to fiscal policy. And i think this is a little bit premature, a little bit exaggerated. Some Central Banks, like the bank of england, are still easing. But in terms of fiscal policy, we are not seeing a big return yet. It is happening in japan but not really here. ,manus vincent, thank you very much. We will have to wait for that moment. Head of fixed income strategy and fx at societe generale. This is bloomberg. Manus the kiwi kicks back. Surging to a one year high. Sales dropping since the Global Crisis of 2008. One year on from the pboc evaluation. Global currency ambitions look now . The best younts is can do . We want more. These markets want more. They want more demonstrative action from the likes of the reserve bank of new zealand and london. Flashing up at. 2 of 1 . We have had a raft of german data. We have had a number of earnings that have come through. Some of them on the bright side. This is a big way for the dax. 51 percent. This is how we look at your risk reader. This has been a little bit of a movement in some of the markets. The hang seng up. This is the Chinese Market specifically moving on that. Banks and insurers are taking it up. Were waiting for factory output retail. We lost 2 over the two previous session so we are seeing the downward shift. Nationwide, will opec galvanize themselves to a bit of action . Gold is down 1 8. We have been dropping for two days in a row. It is a question of what you think gold will do. That will with a chart. It was an option yesterday and we saw an extension so bond prices dipping by. 01. And 23 billion worth of uber was brought to the market. That is the lowest yield of maturity in most four years. And who were the buyers . It is almost highyield. U. S. Deeper is highgrade. Forgive me. Foreigners buying 10 year bonds. Where do you get a yield . What is the real yield . The backlash begins create it has begun and guilt was the best performer. Markets, Rosalind Chin is with me today. the bank of new zealand cut Interest Rates. The record low of 2 . But traders deemed the decision insufficiently dovish. Brexit is undermining the near term outlook for the Housing Market with demand in sales dropping in july. Inquiries phil for a fourth month while its index is pointing to the fastest decline in transaction since Global Financial crisis in 2008. Thepboc has set set highest since the brexit vote coming one year after the evaluation that unnerved global markets. Options traders are the least bearish in two years. Client his declined to the lowest since november. Deadly wildfires have hit parts of Southern Europe as high winds fanned the flames. Four people have been killed in portugal as houses were burned down. Forcing the evacuation of thousands including tourists. In france, multiple fires destroyed buildings and forcing residents to flee their homes. Man who wanted a private audience with donald trump spent three hours scaling trump tower using large section cups. The 21st four. Posted a video. He said he had important issues to discuss bloomberg. This is bloomberg. Manus that is one way to get an appointment. What lengths would you go to to get and women with donald trump . Get an appointment with donald trump . Have a look at what is going on with markets. You have to look under the hood because most markets are up on the way up and we are in the last few hours of trade. It is a case we have the heavyweights, the blue chips in australia and a few of the big tech names. It is about australia as well. Have a look at some of these goldmining stocks. It is the resource play and financials pulling everything lower as well. I want to remind everyone that japan is closed so no trading there. We are supposed be closing up and the markets were closed for mountain day. It been downhill for investors. The other big market story here, a lot of centralbank action, two out of three are done. You have new zealand and the bank of korea and the philippines out in two hours from now. You could interpret that as the markets expecting more than what was given, 25 basis points. Forexs the story across markets. Apart from the kiwi dollar Everything Else is on the back foot against the u. S. Dollar. In terms of retracement the forar index can be traced half of the losses. The output they say is ok. They will keep policy accommodative in the near future. That is exports still continue to fall for 19 straight months. Manus mountain day holiday, the newest holiday in the japanese calendar and it is a longstanding cause for hiking or groups who want to celebrate japans terrain. There you go. We bring you everything here. On a roller been coaster ride since last year posted on relation. The move followed by chinese officials and cursing their intervention. Has it all worked out . Lets go to hong kong and our asia fx editor. Day. Ad a long working what has changed . Robin what has changed is the temperature of the office pboc has managed to tame markets to train investors. If your member gathered valuation was 1. 9 . The currency has since declined about 3. 6 . Pboc has stepped into the market several times one way or the other and it has not sparked the selloff or huge concerns and people are not criticizing the pboc so this shows how the China Central bank has succeeded in managing expectations, succeeded in avoiding market moves and become more transparent where investors can basically foretell what the pboc is going to do. If it does not follow the markets they understand this is for the shortterm. Quelling is all about those volatile moves and that is all about the aspiration in terms of inclusion in the imf. Have things improved . How have things in proved . Tell me that. Robin what has improved is that is the transparency. We now have an approximate idea of where the next days fixing is going to be. The pboc has succeeded where even the dude if they do not set the fixing, the market does not react so much. Pmi goes into her contraction. Nothing seems to be moving the markets because basically what the peavys pboc has done is communicated they will going for a slight depreciation. If the pace picks up we come in and stop that for now. What has really changed is that is the perception of the thatt and the perception the pboc will not let things slide. That is the difference from 2015 august and now. Manus thank you. The chinese have a grip on their currency. The flow of money, hot money out of the economy has abated. There is a little bit of optimism. This is the hang seng and the shanghai composite. Fell off last year, it a cliff. Ofhave had some level retracement. Are you convinced by everything you see in the past year . Is trying to manage the transition away from that investment driven economy. That process proves an awful lot more than they originally expected. Stock market collapse. Here we are a year on following the turmoil in february and so on and so forth. Things feel a lot calmer. What appears to have happened is they have reverted to a bit of the old style economy. The old bank lending, a bit of the old export. Seems to be smoothing that transition. Andgs seem a lot calmer markets are much more relaxed. Manus from your perspective, how do you did you play through currency, and we do take equity risk in china . Guest i avoided altogether. This strikes me as difficult to manage. It is a difficult market to take a view on and the questions are so big. When you look at the huge amounts of debt and the chinese youomy, is that a question want to answer . Too difficult. Avoid that market altogether. One other market were looking at, the New Zealanders went for another rate cut overnight in the market snubbed its nose. Grasping demand for more stimulus. The aussie kickback and the new Zealand Dollar kick back. There be a cutting rates, they have gone twice this year. They have gone six times since last year and it does not look as if they are done. These are two of the few Central Banks that are quite a distance away from the zero bond. Currency markets are back lashing against Central Banks. Guest the thing you want to worry about at the moment is the Central Banks losing grip. We have been reliant on Central Bank Intervention now for nearly eight years. Qe era and everyone has been following the Central Banks, follow the qe, follow the rate cuts, so on and so forth. And clearly you need to worry if Central Banks lose a grip, markets will get disorderly. Manus what does that mean . Lose confidence in their ability to set asset prices, asset prices are not being set by financial markets. They are being set by Central Banks. They are the buyer of last resort for all assets no. If we no longer believe the kenseth is prices, market prices where might be a long way from where they are now. Manus i thought normalization is in theory with the reserve is trying to go towards. Dirtynd market will be for the rest of my lifetime. They are trying to normalize. If Central Banks are sitting pricing the fed is trying to normalize. Eight years in, these of the most contaminated markets in the 30 years i have lived in the market. Except in the normalize when everyone else is not to mark if the central bank is trying to normalize, try to raise rates, trying to get let the bond market clear and here in the u k were intervening again, cutting rates again and in japan and europe their intervening, where is the money going to flow . It goes into the u. S. Keeping Interest Rates low. Throwinge you still money into the u. S. . Im tried to pull up the chart that caroline had terms of the flow of money. Have a look at this. What this shows you is treasuries drawing in record its from foreign institutions. Are you part of the flow into u. S. Equity and do you think this is folly, this flow of runs into 23 billion worth of bonds. Do. She in . Fools rush in . Asked we will be buying u. S. Treasuries. At the moment they are double. The u. S. Economy is in good shape area they will look for where the currency strength is. The u. S. Dollar looks attractive versus sterling. U. S. Yields are greatly higher than everywhere else. We see a trend of dollar strengthening against sterling. There are too many questions. Manus we will have a conversation about that in just a moment. A dollar will run. It may be coming to an end. That is the shot in the arm right here on countdown to come. Manus welcome back. A little bit dull and overcast in london. Theresa may went to switzerland on her holiday. I want to bring you in and have a look at the futures board. I got to the bottom of it. London is down point four of 1 . Yield create. 84 next, over 5 . You have a total of 18 Companies Reporting in the london market. 36 points in total. Burberry is 6 . Royal dutch shell is delivering in terms of the index points, six points for burberry, six points for next and royal dutch shell. You need a 4. 71 . Bad if you canoo rave and stomach their rumble and tumble of oil prices. David a lot of earnings. Deutsche telekom reporting and 8. 6 increase. It fell short of estimates from analysts. Earnings climbed. There was a offset revenue drop in its home in germany. Fell. Irdquarter profit steel makerrgest said it drop to dropped in the threemonth through june but that the analyst estimates and the company reiterating its seeing clearast, signs of recovery. Pressure on premiums makes it difficult for the industry to make affability. Net income declined under 740 million beating analyst estimates. Anytrying to make the come more efficient by cutting jobs, selling assets, and combining the bigger units, global life in general insurance. Nintendo and niantic are being sued. Goouple say gangs of pokemon players have made their local never had unsafe. They claim they have been trend by people who hide in the bushes and refused to leave the area when asked. Officials were not available as it is a Public Holiday in japan while niantic did not reply to an email seeking comment. That is your Bloomberg Business flash. Manus thank you. A fiveday rally that has prepared desperate hauled propelled the dax. It is up over that 70 level. Analysts are saying it is overbought. Like it, love it, hate it, rsi. Lets see what our guest makes of it. Are you and i are are you and rsi fan . Momentum is in there. Germany is strong. Guest ultimately, what is going on here seems to me that germany is following where the usled last week area the u. S. Economy coming out relatively strong and germany as an economy is a follower economy. It is a export driven capital goods driven economy. China doing a little bit better and the u. S. Doing especially well. Also doing a little bit better. Manus what do you like in germany . The result deutsche telekom, third heard the cfo quarter profit drops. There were some idiosyncratic issues. They are cutting their sales percent 2 . Ofm the perspective participation in the german story, where would you want to be . Guest what is to like about europe, what is to like about germany question market has to be those capital goods, engineering. That is where the expertise is. Germany is not the consumer driven economy like the u. S. Or the u. K. When the rest of the world is doing well so will the german exporters do well. We like inhe areas germany where we like the market. Similarhe uks showing hallmarks. We had the postbrexit based on the demolition of sterling. Does that continue . The other thing we were saying is the commodity rally could be near nine done. I have the paper here in front of me. Dissipate. Could this is a report from the aussie government and westpac. They say is going to be tough for commodities to hold on. Revenue and commodity gains. Guest what we can be confident of is whether it is oil or commodities, that that huge collapse in Commodity Prices is behind us. We are dealing with markets that are a degree more stable at least. Suchu are a Market Leader as royal dutch or rio, you have the low cost reduction. You have a Sustainable Business model. And therefore these companies are going to save their worst. Is that dividend by to be sustainable question market looks a lot more sustainable than it did six months ago. Manus lets take this up. This is the page. It does not look that sexy but it gives you a complexion. 18 companies, it is standard thing. When you look at this, that just roars to me dividend, dividend, sustainability. Burberry and grand have had a boost. I will walk away with 4. 7 . Guest absolutely. That is the attraction of the u. K. Market. It is the huge income paying. And why the people like the u. K. Market where there is no yield anywhere. Anywhere at all. We look down the list here, huge u. K. Stocks, we can argue about each and any one of them about how sustainable that dividend is but across the page, there is a lot of income there. Manus thank you very much. Caroline hyde is next. Guy welcome to on the move to come to thecounting you down european open. Caroline hyde is in germany and this is what were watching you figures from the Royal Institute show sales dropping the most since the financial crisis. Youve got . The kiwi surges to a oneyear high as the market signals today. On anniversary