Language at the next Federal Reserve meeting. That will be a starting pistol in the fed interpretation of when the first hike might come. Typically that would mean six months time. European equities are lower. Iron note from jpmorgan on ore and where we are going with that price. 2016 65 back in bucks. Global demand is going to moderate oversupply forecasted in the near term. And china as you see this quite strange move they will reduce the amount of bonds they have prepared to give out cash for at the central bank. This is a reflection of where we are concern about growth, supply and pricing in terms of those metals. A conversation with hsbc this morning mr. Sullivan said get your portfolio ready for shocks. Underweight they now begin to look interesting from a dividend point of view. Lets have a look at these three. Man as towith palis whether they will get together and do a deal. Repsol down 2 this morning. 22. 7. Own in september and october challenging. They do see some improvement in australia and france. Way waiting for the tesco bell to open. They indicated down 10 as they warned we will make 1. 4 billion pounds in 2015. That is below the market estimate. Lower and the yen is doing something it has not done for a while, it is strengthening. Dollaryen seems to be in the masquerade of a currency that one would go to in times of a pause in the equity market. I say masquerade because you are seeing everything from easy calling to another big leg in dollaryen. Never has the divergence not never, but the diversions has been quite large. Nineve you with this, day the longest losing streak since 1979 as the National Australia bank is his confidence falls and they cut their target. They say in come march and august of 2015. Im looking at the ftse 100 we are down 53 points. We are waiting for the big one to open tesco. Tesco, profit warning at the british food retailer said this morning the fullyear Trading Profit will not exceed 1. 4 billion pounds. Fromng me now with more the city of london. Were waiting for a price but lets put this in perspective, 1. 4 billion, how bad is that . By half au miss billion it is a sizable percentage. Were talking about an equity that was down 44 on the year when it does open there will probably be an extended auction. Talking about a stock half its market capitalization in that year. The markets get pretty aggressive when you have to come back and restate errors that you have made. They did say there were would be further costs they would have to in core incur but half a billion is pretty sizable. You talk about the retail space and people cannot say is that it . And then it keeps coming. Over the last month have you seen a lot of clients getting back into tesco . There have been people who are interested but you think there was always a feeling that we were waiting for the other shoe to fall. Who try have a new ceo to sweep the decks and clear out on closets and get a grip everything and a ceo who does not have experience as a retailer it was a difficult ask. Worth wanting out is theyve increased staffing by 6000 and that is a heavy cost. We are in the important time of year and there has been a natural migration anyway from these premier food retailers. The little ones have been chipping away at the market share and have a lot of attractive loss leaders getting footfall through the door that as far as tesco is concerned largest market share online as well. The demographic where it is shifting towards. It will be penalized heavily today. Much, peter larson, getting penalized heavier. There is the opening rise. Than 10 , down by 14 . Tesco down more than 10 down by 14 . Y and earth to the chief executive not throw everything out there and get rid of all the bad news at once. The approach of kitchen sink in trouble it is difficult to do when you walk into an organization, you start to understand what is going on. It takes time to identify the problems and there is the issue that problems are still developing. They are still a career. This is one of the situations where tesco is increasingly finding itself in a bind. Rcing themselves to way chipped away by waitress. Waitros. They want Convenience Stores which are next to other Convenience Stores which are more convenient. Look at the Credit Rating two years ago this was a good solid singlea credit and today it is poised on the edge of junk. Lets talk about credit, you and i were looking at the numbers, 16. 2 billion pounds. Was 15. 2 billion pounds before the open and i can tell you the market cap now is 13 billion pounds. This is normal . You can do the math quickly and work out your getting a sort of italian debt number. Therly creates issues major Sterling Investors will have large positions in tesco. If you take a look at the tesco see aharts, you will whole series of down steps with every bad news but this is getting close to the stage where people will say this is no longer cool. If it drops more it will be down to the s p who will downgrade them first. There is more uncertainty for anybody and it will go to new indices the highyield indexes. Thats the credit story and i want to get to the stock story as well. The one that stands out is tesco, number five. Hathaway and the man at the top warren buffett. I think he already said he might have made a mistake. A big mistake. Everyone thinks you cannot go wrong if you pick up the great retailer and iran were not that long ago marxists spencer was aaa credit you have to keep a close eye on them. The guys at the top of the pile shift and thats a lesson everyone should be taking. Is this a lesson of a company with a huge legacy that is too big to change . Is that too far . Theyretail companies are always going to be struggling to move quickly as conditions change and i think people miss misjudge how quickly changes happen in the retail sector. How quickly the move of doing your shopping once a week to doing it daily again is easier for People Living in the citys to pick up daily food ache is a dont know what they are doing and dont want to do the big shop. Then there is the issue of online retailing. Online retailing is a loss leader for the supermarkets it cost them money every time they deliver. So they get stuck trying to be the new thing but where i live we have around about called tescos roundabout. Operve no idea what the pr name is and that is the roundabout would you know if you take the second turn you are in shopping hell for the next two hours. Letso be fantastic go to tescos and now it is a chore. Thats what people who have done big institutions no longer find themselves relevant. Theyve increased the range of 30 over a short period of time and others are focused on a small range. If i want to buy the best tv the whole top floor at a story tescos is full of i dont go to tescos i go to the internet or to where someone can tell me something about a tv. Just as if i want to get to presence for the nurses nephews and nieces i dont go to the toy shopping aisle, i will get them delivered online. Its all these eight issues where five years ago the onestop shopping is gone and changed. We can talk about the strategy and the culture at tesco but when you have a massive real estate legacy how do you manage that . Real estate market outside residential in london and the other cities is a very challenging market. You have an awful lot of spaces were maybe some will get closed and converted to other commercial purposes but that residential bank that land bank they have the valuations are all over the place. We have to leave it there, stay with us. The big move of the morning, down 52 today getting battered this morning. The biggest year to date drop on record. This is a february 2000 low for tesco. After the break it is not all about tesco we track the political storm in greece. Could we see a new regime in january. Welcome back to on the move. Im Jonathan Ferro live from the city of london. Time to talk greece. What could be a risky gamble by the prime minister. After the summer he called a snap president ial election moving the vote scheduled for february 2 a week from tomorrow. Week from tomorrow. It feels like 20112012 we talk about the election but the panic is not there. Looking atpeople are greece as more of a stand on its own problem. I said this a number of times and everyone every time i have been shot down saying if there is a crisis in greece it will spread contagion and the rest of europe will interrupt likenight josh just chestnuts at christmas time it will be a whole different problem. Greece has gone to the sidelines in the last couple of weeks as we have had all the concern over the bailout we have seen greece balloon out what the rest of europe has tightened and then we spreaden greek greece titan back in. Tighten back in. Whats happening today is something weve seen time and again where the leading Political Party puts its reputation and the country on the line to force a positive vote. 2010, 2011 and 2012 with the government said if you dont vote for us a nasty can of worms will be opened. They need something where they discussed the numbers before we came on 25 politicians to vote with them. If they dont we end up with an electoral cycle which would end up with the lunatics taking over the asylum so to speak. Dates oking at the the president ial race diary. First round, december 17, second round of summer 23rd, third round december 29. Will you be at work december 29 . Know and most of the market wont which makes it a good day to have it. Will be a more limited problem if we do see an election coming in greece, people will factor that in. The expectations will be that we lose the election and we see the leader of the party come in and win easily well, who knows . Will see is a lot of backroom deals being done in greece to ensure the vote does get past passed. Leader, talk about the a huge risk. 2012, he was running a campaign to pair up the bailout agreement bill. And they have matured since then. Its a completely different when it was the rebellious kids on the block. They are becoming president ial and i think we talked about it a couple months ago when the bailout question started the risks stemming from his victory are less because every time we have seen a new greek government and this will be the third one since it started we have seen very quick accommodation to do what they have been told. You get a little give and take from the tricut but also quick understanding from politicians about what they need to do to keep the situation going. My read is you will see some kind of political agreements in greece and you will see them get what the Current Party once and if it doesnt happen Market Reaction will be more recent than last time round. A in january we have theyntary election are ahead in the polls right now and if they took over that government, contagion . Know i think contagion be different am a people will be different, people will be reminded a political risk. There will be social pressures and people will think what is it mean for spain or the other parts of europe but if you look at the crisis areas like portugal and italy, we are not so concerned there now. We are finally getting reform in some of europe. A change that greece could do is show how fragile the euro edifice is. Ira were talking about two years ago and it was a very different subject than cash i remember i remember talking about two years ago, it was a very different conversation then. Bill is not panicking, im sure some people are there is the stock right now, the Company Trading at a 2003 low. Welcome back to on the move. Time to talk about oil. Crude, absolutely crushed this year. Over the last two and a half weeks you have seen brent slide 22 and now we are seeing repsol in talks with Talisman Energy for a possible deal. Is this a good match . Are there synergies to save money . There are synergies it just depends on what the deal is. Using think about repsol two things they had the desire to go into Development Market and 10 billion in cash thanks to argentina after a company got nationalized. They have the will and the means. Look at Talisman Energy on the other side, they need to sell something and have been public they need they want to sell the company or assets and they need to sell at least 2 billion worth of assets according to the ceo. When you think about develop markets in the world, there are not that many and the United States is one of them. Those are one of the assets that Talisman Energy has that would be very interesting to repsol. The question is would they just sell that for the whole company . North American Assets account for maybe 40 of their overall portfolio. They have some rotten assets like the new work see newark downthey may have to write some of those assets. Said you buy the whole kitchen sink and try to separate the good from the bad . Or get it on a really low price . I think thats the issue. Lets get to the juicy part of the consolidation story the brent price. Worst year since 2009, this has been stunning. 65 a barrel down 40 since the high from the summer and i was than 80 was the floor and 70 was the floor and now they are saying 60. This is cop located because it plays into talismans hands. They have global assets but are not doing well and they have suffered on the back of the decline in the price of oil. Of those assets need a much Higher Oil Price than they are getting. Since the last time repsol called off the talks Talisman Energy share price is down 60 come up much more attractive than you think about yesterday and look at their share prices it was down almost 12 . The news that they were back in says it sent the share price surging 8 , still down 4 . Difficult for the buyer and seller to come to one position on what the price should be. Still to calm, dealing with divergence. Welcome back to on the move. I am Jonathan Ferro at European Headquarters in the city of london. 30 minutes into the trading day. 5100 down almost 30 points. The stoxx 600 up by 1 . Andre falling further further back from those sixyear highs. There is only one story in town. The biggest decline ever for tesco. Shares down as much a 17 and 17 are not as much as and they are not that bad now but they were 52 lower in 2000 13. The profit will not exceed 2013. The profit will not exceed 1. 4 billion pounds. That is almost half of what they disclosed a month ago. The company will provide more details about its ongoing strategy on january 8. This is another stock that has been hammered into thousand 14. Shares 7 lower. The online only fashion retailer was less than analysts expected. Trading conditions abroad remain challenging to use their words. Cells grew by 24 but International Sales declined by 2 . Internationally is where the problems are evident because of the strong pound week australian dollar. And repsol 1. 83 lower today. Seekingish company is acquisitions to bolster its company in north america even while Oil Prices Tumble to five year lows. Read, red, red, red. Tesco is the big story, the biggest percentage decline ever. Moves to theme big tesco share price and now take a little bit of a breather and talk about 2015 because it will be all about divergence. That is according to my next guest who says the disparity of Economic Growth and Monetary Policy will be underpinning his 2015 base case. Great to have you with me. We think about the virgins next and divergence next year many global outlooks wouldve talked about the same thing weathered centralbank policy but in the top line of your outlook, how the financial cycle has leapfrogged the business cycle. The same point of the Economic Cycle in the 2005 stock market, they were up a little bit and they are up hugely for where we are in the Economic Cycle and the key being Monetary Policy. The u. S. Monetary base is up i a factor of four and that has by a factor of four and that has driven the highyield up. Valuationsthe asset and complacency are at a high, what is different from the year before and the year before . Will there be a catalyst for correction next year . Its the straw in the camels back. Declinestic dramatic in the price of oil was set off a chain reaction. Whether it be companies in the foreign highyield market finding it ethical to service ir bonds or leverage lows or the losing terms of some of the sovereign or the consumer. Of thechange the price worlds most important commodity by a factor of 40 in a relatively short. Of time period of time that is an important issue. We have seen a stunning decline in the commodity and we could talk about risk and paint the negative picture for every asset class but blackrock has to put their money somewhere what are you optimistic about next year . You have to remind yourself there is a huge benefit to the consumer globally. If the wealth transfers from the rich to the poor if you like. Theink that will mean european economy will be great but expectations are so low it is just a little bit better and the patient is sitting up in bed. We could see the American Economy doing reasonably well and leading the world in 2015 and for all the gloom and doom about china it is the single largest contributor to Economic Growth next year. This divergence and Monetary Policy will be tightening. Most other people will be giving away the u. K. Its a coin toss. Everybody wants your view on europe and i pull this from your outlook the eurozone is a lowflying plane that constantly hits air pockets that causes neardeath experiences. Some poetry creeping in there. [laughter] when we talk about divergence, and the ecb doing more they are not yet. They have this enormous political issue to get past, it is not the central bank for a single country. There are 17 chairman around the tradable. Table. Theyve reached the number of conclusions they never would have got two. To. There are people around the table who dont want to do it and there is disagreement so i think it is just a bit longer. Qe we look at ecb know what it means for equities. Of qe the same as 1. 20 of qe . Related toh smaller the european economy and the European Central bank which is now saying that the Balance Sheet is not a target but an ambition that is modest compared to what the governor is doing in japan relative to the side of the japanese economy. It is modest compared to what the Federal Reserve has done in america. Lets talk about the bank of japan. The bank of japan go in somewhere up here i read in your notes 60 of gdp this line stands out bloomberg. Com they are playing with fire. What is the central bank what if the central Bank Actually succeeds . One of the issues in the election this weekend there is discontent about the level of inflation and there is concern that the currency could overshoot. The bank of japans view is that it is still ok but i think that thesk that could extraordinary situation next year where japan has the highest inflation rate in the g7 think about that from a few years back . Im going to think about that and People Holding jgb will think about that. This is a story for europe because if you believe that a central bank can stoke inflation and do it quickly why do want to be in Court Government bonds . Its a price keeping operation. Thats what will happen with jgbs next year. Thats whats happened with core european bonds with so much of the supply sucked up through purchasing. 0. 8 for aice is not 10 year bond, it reflects people needing to own those bonds for regulatory purposes and for hedging purposes. I dont think well get a huge selloff next year. The paying trade of 2014. Government bonds and it cannot go lower because the fed will get closer to putting up rates. I look at the outlook for 2015 where it is blackrock or elsewhere and they all read the same story the yields must go higher. Will next year be any different . A little different because you will see a rise in shortterm dollar rates. This is the first rate rise by a Major Central Bank in this cycle whether or not as Governor Carney says here it is a bit of a coin toss. Shifts up so curve they slightly rise across the curve but there is much more stress at the short than the backend is the story of inflation and massive regulation and demand for highquality bonds. Lets talk about what this means for the currency market. In 2015 outs is that the dollar will be strong. You guys called them me too investments. How worried are you about that being a crowded trade . You can respect the case for a strong dollar very straightforward. Everybody can do that, everybody can recite that now for example the dollar has to strengthen against something so lets suppose that an europe the economy just about revives a little bit and that the current account surplus increases because of the plying in the price of oil. More of amuch financial outflow from europe than a year ago to make the euro weaken against the dollar. The positioning is very long on the dollar so if you wanted the utter contrary and trade this is a christmas under the tree bazaar idea, there was always something that goes up if the dollar goes flat or down and it could be the gold price. Elsewhere . Oil majors . There is a point where the oil price it is a falling knife. There are predictions that the price will be 45 from the same people who predicted bemonths ago that it would 110. We have to pretend the oil game will shrink and it will be a Survival Game and at the end of the day the big monopoly will survive because they have the customer base. This is how i want to wrap this up i am interested in the process behind your outlook and one of the things you did was get 120 blackrock Portfolio Managers and the question you asked in mid2015 if one of these investments blew up how should you have hedged it what came out of that meeting . There is a lot of concern about crowded trades. We believe the japanese stock market will do well in 2015 but we know we are not alone in that we are looking at momentum. It is been a great friend to investment returns and and and or miss enemy at times and we think there will be more interruptions to normal service. An enormous enemy at times and we think there will be more interruptions to normal service. Bulletng to have dodging will be a bit of the game and making sure you i into the dips buy into the dips rather than worry about them and is absolute level of returns probably lower than 2014 because of the draining of qe . Coupletheme of the last years is the reach of the yields. Divertedvironment of and policy does the story change . People are looking for more and more liquid strategy so there is an enormous interest in real estate and infrastructure debtand how Long Duration securities are off of things like when farms. What i worry is not that people take the Liquidity Risk that they buy something ill liquid and expected illiquid and expect it to be liquid and it wont be. The Global Executive strategist on blackrock and their look on 2015. The bloomberg exclusive is next after the short break. Welcome back i will bring you a bloomberg exclusive now, manus cranny spoke with the ceo and asked him about restructuring the banks and the layoffs under his tenure. I think it was the most respectt decision in because the decision about positioning the business after analyzing various options was and my colleagues had a high level of confidence and the board was very supportive and we all had very strong confidence that this was the right way to go but the and inences were clear plate cases people impaired it to commissioning a nuclear plant. , we knewoint in time we had an excellent swiss business an excellent Investment Bank but they needed to be refocused and reshaped. We knew that we had the ingredients and that was the factorportant confidence that we had. It was all about execution and making sure that we would not overpromise and overdeliver. That sometimes has come through when we go through the Quarterly Results what did you learn in the past three years in going through this change as a ceo . Youve now had three years at ebs what have you learned . Executing theand strategy the last five or six years of this environment from a macro point of view it taught me one thing clearly dont count on the economy or the market look at what your business and what you can control. Unfortunately we have a very balanced and cautious outlook and unfortunately we are right. That is something that helped us to put through the discipline in saying lets do the right thing and fix the fundamental part of the business. It,rest rates you name they are not going to go the way you desire them to go so fix your problems. There is a possibility or rub ability that we will lose some that we willbility lose some of our compensation possibly in raising rates is that a bigger risk . Nobody has stopped qe and raise rates. If you reverse the policy in we u. S. It probably means have a big change in the macro picture that we dont expect at this stage but we do expect next year rates in the u. S. To go up mildly. It should not be a shock. In europe we are of course likely to see the beginning of what the u. S. Has been doing for the last few years. The beginning of a great experiment . Doing qe in europe and i think i am right in this is in your inw not the same as doing qe the United States of america. Absolutely because there are two fundamentally different systems and the underlying structural problems are different and i dont think qe can resolve the issues on its own qe is a powerful tool potentially if it goes alongside structural reforms, fiscal reforms and political reforms that the euro needs in order to be successful. I am happy to say that he trekked the mountain and has come back down and manus cranny is here the man who brought you that the interview some punchy lines. It was a very lakhs interview and we will have a lot more that our viewers can see, we covered a very broad range a very broad church of issues. That will be later on on the program in the runup to business. He was in a relaxed mood when we got there and when we sat down for the first interview if you you put i said so this strategy in place you think it is a success . He said no it is far too early. So we started this conversation and i said give yourself a mark out of 10 and he said it is christmas and i said dont give yourself seven and he said eight. I think we talked a little bit about risk picking up on new income and sergio made it very clear that no one isolated incident is enough to perturb markets it is a coagulation of incidents or a number of big issues but a lot more to come. Cranny, more from manus looking forward to that. Break, greekthe stocks taking a beating and tesco is also down. That is the big corporate story of the day. Welcome back to on the move. Another day and another profit warning from tesco. Here with more is charles allen. What are they blaming it on now . The underlying reason is slow sales and they have 6000 extra people in store but the biggest story is they are changing their commercial policy and that means how they i their goods from buy their goods from suppliers. Technically it means theyre losing moving from back margin to front margin. Theyre going to try to build up the volumes on products that consumers want. Down 12 , not as bad as the start of trading but on the year 50 so when does the margin story recover . There is still a little bit of the unknown because we have a ,umber day another day january 8, but i think the message between the lines today the policychanging and this is a rebuilding of the margin from the beginning of next year and that seems to be the message. Whether they can do it a are not operating in a vacuum, so thats another question. To come on the tesco story on the pulse. Before we go to the break lets check on the stoxx 600. The stocks taking a little bit of change today. The government have brought forward president ial elections which could trigger parliamentary elections. In the meantime if you want to follow me on twitter or talk markets, you know where i am. That is it for me, good luck for the rest of your day. 100 days and two profit warnings. Of thees to gain control retail giant, tesco. A call for reform. Usedrock ceos streaks lucy liu to bloomberg and hear from them later. Speakskrock ceo exclusively to bloomberg and hear from them later. The technology summit