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Welcome to the pulse, live from london. Im francine lacqua. Lets get straight to Central Banks. Its a big day for Central Banks and it will be an even bigger week. The s p has maintained record low rates. With the ecb loosening policy the fed is expected to tighten. Where does that leave everyone else . Lets bring in Richard Gerald for the next half hour. Helps manages around 3. 7 billion in assets. Great to have you on. Set the scene for us. We have the new zealand central bank, and theyre getting ready for the said. The fed. Yeah. Central banks, a do interact with each other. There are a lot of machinations, but everyone is acting in their own best interest. After the ecb surprise last week, the bank of england this week will probably deliver a similar message to what we saw last month. The pound is weak against the euro because of what the ecb did, and i think the bank of england are quite happy, quite comfortable. They wont want to be too hawkish because they dont want the pound to gain against the euro. Francine if we take a step back because of what we heard from the ecb, it makes the life a lot easier of people like the s p. Indeed. That if thefeeling ecb had acted more aggressively, we would have had some big from the smb today. They repeated a lot of the forecasts that looks to me like they were quite similar for 2050 and 2016 in terms of inflation. They obviously lamented the strength of the swiss franc, which is still a problem, but because the ecb was less aggressive than that he thought they were going to be, that allow the smb to stay on hold. Francine give me a lowdown. If you are an investor, is the set a done deal . Yes. Francine something small. Something small. People will not be concerned abo ut when, but what happens next. What happens next is the fed managing expectations, saying guys, keep calm, we will be very data sensitive. Ultimately, investors need to properly take the pain that comes with tightening policy, but ultimately, this is not a sentiment anymore. This is no 1994. It has been telegraphed. Policy is very visible. Willthat means is it probably not react very badly to what happened. Francine we are just seeing from the Swiss National bank, mr. Thomas jordan. What does that mean for currencies . This year if you look, it is the year of currencies. We saw some huge swings in equities, but it was the year where you position yourself on currencies and make money. What happens next year and where do you see the swiss franc . I think next year will be a continuation of not only 2015 but an exacerbation of what happens. Thisll be a year will they have to make money year where they have to make money, as far as currencies are concerned. Will be verys volatile in the shortterm but also quite directional. The swiss franc will continue to strengthen, the euro will continue to weaken, and sterling will very much oscillate, but it will be slightly stronger than the euro, and maybe not as strong as the dollar. Emergingmarket currencies, huge dispersion. Those that are affected by weakening in terms of trade because of lower commodities, and china, like brazil, russia, south africa, will struggle. Those which are outside of that well holdld very value. Francine looking through what the Swiss National bank said, in the analysis they said that the global backdrop has deteriorated, but they are cautiously optimistic about the outlook. What are they talking about . China, commodities . All of those. And they are looking at Global Demand and seeing commodities, perhaps as a proxy for that. Its a very uncertain picture looking forward. You can understand why they would be a little optimistic about it, whether they want to take that tone. I think they are both taking the view that there are still some headwinds in the future and that they will act accordingly. Francine we talked about the divergence in emerging economies. Which is the one that worries you the most . The ones that are in a systemic recession. Brazil is an area where one struggles to find anything. Normally you have Monetary Policy being able to react, but brazil with how sticky inflation is, because of this collective Bargaining Agreement that sets wages irrespective of what happens with inflation, i would say brazil is in the area. Francine and we have been warned off by the International Stability board that there are so many countries from emerging economies that borrowed too much. Come december 16, the day after the fed, going to start seeing some of these companies unwind . Businesses that have been issued dollar debt will suffer, but only those regions. I am not necessarily concerned that the chinese yuan will lose a lot of ground. If so, i would think it would be forced to strengthen a little bit. It is true that come next year, come 2016, you will see some widespread but selective action, be forced to restructure the debt because of the strength of the dollar. The dollar will be stronger next year against some of these currencies. The dollar will be stronger against their real, against the lira, eventurkish the South African rand. Francine lets have another conversation about what it does to u. S. Exports. Thank you so much. Richard joins us from london, who stays with us. Here is a look at what else is on our radar. TheSouth African rand, finance minister was fired yesterday. It fell 5. 4 against the dollar. Argentinas president is inaugurated today, but it doesnt lack drama. Is refusing tont attend the ceremony and hangs the sash. A group of lawmakers will also boycott the event. Will hold an extended News Conference as the emissions scandal broke. They will talk about the status of the investigation. Up next, a race to the bottom. The biggest losers on the ftse this year. We look at the plans for companies to turn themselves around. Francine welcome back to the pulse,liv streaming on your tat and phone. Glencore has announced a new financial target today. It plans to cut net debt to 19 billion by the end of next year, which the stock reacted to. Lets get details from ryan chilcote. Will this be enough to pull back from the plunge . Ryan it is enough to pull the stock back from the plunge, the abyss it has been in. They had their fifth best day on four separate occasions have they outperformed the share price increase we have seen today. Shareholders clearly delighted with this focus on Debt Reduction that we are hearing from the company, saying that it will accelerate its plan to cut debt, that 19 billiondollar target for the end of next year you were mentioning is down from a target of the low 20s. Right now glencore has a 30 billion debt burden, the biggest in the entire industry. They said they would go to the low 20s and now they are talking about 19. They already introduce a Debt Reduction program and today they said the secured a . 7 billion worth of reductions. If you look at their trading arm remember, this is a Mining Company and a commodities trader if you look at the commodities trading side of things, the forecast for pretax profit going into next year is less than they made during the commodities boom, and it shows you how the Debt Reduction is really affecting profit. Obviously when you reduce debt and cut expenditures, that does have an effect on the business. He will just be hoping, investors got the mix right, and who they are talking to now to make sure that he knows exactly how it will work out. Francine ryan, how will they achieve the Debt Reduction . A lot of the market was focusing on the Debt Reduction. Is the amount enough and how will they do it . Ryan some out there would say that it isnt enough, but clearly investors are greeting what they are hearing. Two ways. One is that they reduce capital expenditure, so they will spend 5 billion next year and next year they will spend 3. 5 billion. They said they could parrot back even further this year. Pare it back even further this year. Overall they are planning on saving at least 1. 5 billion in terms of capital expenditures. The other thing is asset sales. They are in talks to sell a stake in their agricultural unit, to sell other assets. Today they raised their target from the amount they want to raise from asset sales from 2 billion to 4 billion. Francine thank you so much, ryan. Of course, the chairman of bloomberg lp, the Parent Company of bloomberg news, is a senior independent nonexecutive director at glencore. We like to be transparent. Thes get back to our guest, chief Investment Officer at london and capital. Thank you so much for sticking around. It looks a lot like angloamerican, companies that in the heyday had huge balance sheets, and now because of the slump they cant deal with it. Profits are diving and they have too much debt. That is the problem with debt. It is very good if you have a return on equity which is higher than the cost of capital, but if it is not, it is a nightmare. In arespected glencore, very shortterm and midterm, you do have the potential for the stock to revalue. Sentiment is very, very negative. Short interest is so low that it will not take a lot. Francine i have to interrupt you because we are just getting breaking news from glencore. Isunderstand that glencore setting a possible ipo of the agricultural business. We look at a lot of companies and they seem to be trying to restructure. If theythe right move, do end up putting a price on the agricultural business it means it would take away from mining. Would be selfsufficient . It is a dangerous move. I think glencores plan is to preserve the rating. At the moment, it is not about longterm growth. It is about managing a difficult situation and how the market perceives your creditworthiness. It has a huge impact on your cost of capital, which has a huge impact for the p l. Position doesnt surprise me. Having said that, it doesnt spell good things for the longterm. All of a sudden you have taken a , the valuable out o stake, and what is left is not that valuable. And of course, you cut debt, you plan on profitable units, what do you have . A company that will not grow in the longterm. But you also have the company that may be small enough to be taken private. Correct. Francine is that something we should be more seriously talking about . I think we should. In a way, it is very much about but you also have the preserving, and if the market does not recognize the value, and the market will certainly not be kind to glencore, the dollar will be stronger, there will be another wave of downward pressure and commodity markets. Francine this is a company that there,ick to x traders and when glencore was created, it was only billionaires. I was told the guys behind it care so passionately about their company that they will never let it go. The guys that cap so much ipo for a reason, everybody has concerns. Every time a large commodity ipo, it isup has an calling the top of the market. Theres been inside selling ,hroughout the last few years much like Goldman Sachs 20 years ago. When to stop being a partnership and become a traded company, the alignment of interest becomes clouded. Francine so pau, you say it will be messy for the next six months. The shortterm rebound, next six months very tough because the market will digest higher rates. Probably could be a little better if we are able to implement the degradation, and if they are able to get a decent price for these assets. There will be more talk about it becoming private. But in the last six months, it is catching a falling knife. Francine how do they compare with Anglo American . At the moment they are neck and neck for worst performer on the ftse. With Anglo American, you dont stumble on a black box. You dont have a lot of transparency about how this is generating more than your margin. Who are your clients question mark what are your revenues . They are attached to a Commodity Trading enterprise, whereas Anglo American is a particularly integrated, widespread company, where at least you can recognize the value, you can attach value. I would say that when it comes to Anglo American, it will certainly struggle in the next six months. Ultimately, as they continue to cut not only them but the supply continues to reduce, the prices are moving because of excessive supply, its not falling off a cliff but the supply has to be strong. Supply will reduce. Be lookingcan should back in time and smiling. Francine pau, thank you so much. The chief Investment Officer at london capital. Next, the rams rocked. The South African currency suffers its worst day in years after the nation fires its finance minister. Laura that story, next. Francine will come back. The South African rand dropped after the president fired his finance minister yesterday. The currency fell 5. 4 against the dollar, hitting a record low. The outgoing minister clashed with the government over pay increases for workers, proposals to build a Nuclear Power industry, and to expand the state airline. Lets get back to our guest, the chief Investment Officer of london and capital. We are looking at the rand. If we look at the last six months, it is just going one way, down. What happens from now on . It will continue to go on its way down. Everything is stacked against south africa, and on top of the fundamental areas of the Prime Minister which fires a very popular, very recognized and respected individual, the confidence in investors that south africa needs desperately, it is going to wane. 10 years ago, the peso will happen again. South africa is very sensitive to commodity prices, big exporters in platinum. Youve got bolder abilities from a domestic perspective in terms of creditworthiness, concerns andt the debt situation, houses which are either putting south africas Sovereign Rating on watch or downgrading it. The passed will tell us what happens in the future but in this particular case, the next 12 months will be tough and it will be lower. Francine and it will be much more tough if the fed hikes, which we are expecting it to. We also have the msci emerging markets chart over the last year and a half. Where does that go . Well, its an interesting one. Tempted to say that the emerging markets, a measure of what emerging market index will continue to be going down because of the fed. On one side because a lot of it very much started knocked in may, but in 2013. That is when the underperformers started with respect to the rest of the world. The rest of the world took off emerging markets and stayed where they were. I would say that the valuation cushion is beginning to be so interesting. The second side is that people are accepting the reason, these reasons are not in a great position but they are more flexible than they were. This is not 1998. This is not 1984. Everyone knows that policy will become tighter in the u. S. , because the Flexible Exchange rates were fundamental. I would be tempted to say that emerging Market Equities are not going to have as bad a year as people perceive. Areas be one of the few where being contrarian will feel. Francine as long as china holds up. As long as china holds up. Weaponry,fficient sufficient stimulus that they cant apply if they wanted to be able to engineer a soft landing. A hard landing in china is very much a mild possibility. Francine pau, great to have you on the program. Thanks for coming in. Next, iron ore is down 42 this year, and things could get worse. We talk about the commodity crunch, a little bit more, coming up next. Francine welcome back to the pulse, live from london. Im francine lacqua. We are getting news. The 2015 Airlines Report for 2016, profits of around 36 billion. Given the price of oil, that is a net benefit, and also we have to talk about the concern of terrorism and the fact that a lot of people are postponing holidays, but who have plenty more next. The strengthening outlook is driven by strong Domestic Travel and Lower Oil Prices that will have plenty more. We will have more with the secretarygeneral in 15 minutes. First of all, lets get to the first word with nejra cehic. Nejra the reserve bank of new zealand has cut the official cash rate for a record low of 2. 5 . It is their fourth cut this year. The government thinks it should be enough to return inflation to its 2 target. The kiwi dollar surged on the news. The aussie dollar climbed after job status matched expectations again. Official figures show more than 71,000 people found work in november. Economists had expected a drop of 10,000. It brings the unemployment down to 5. 8 . A survey shows that almost two thirds of likely republican primary voters say Donald Trumps call to temporarily ban muslims from entering the u. S. Makes it likely to more of over him. Bloomberg sources say the u. S. Justice department is examining possible manipulation in the Trading Agency bonds, after 9 trillion of debt were issued. Authorities are investigating whether traders violated antitrust laws. That is the bloomberg first word. For moore, head to bloomberg. Com. Francine thank you. Lets get straight to the top market stories with mark barton. Day of Central Banks, francine, with a record low. New zealand is cutting rates, which brings me to the kiwi. Why is the kiwi rising . The reason is the central bank governor, signaling that this would be it, no more cuts to calm, because he is confident the central bank will reach its inflation objective. The rates were cut by a quarter of a percentage point. In the last quarter, this is the chart of the kiwi against the dollar. The kiwi is the bestperforming global currency against its u. S. Peer, rising by 5 . Crude oil is rising for the first day of five after a fourday, 9. 5 decline after opec effectively abandoned its output target. It drops for the first time in 11 weeks, but still nationwide supplies remain more than 120 Million Barrels above the fiveyear average. Crude oil closed at 37, the lowest level since 2009. And check out glencore, the second worstperforming stock on the ftse after Anglo American. This is a oneyear chart. Big news today, the stock jumping 11 , cutting its 30 billion debt. This 11 rise is the most since october 5, and we have this great function called hrh. It tells you how many times a stock has risen by a certain percentage over the last year, and in the last year glencore has risen by 11 or more only twice. There is a great step for you. The gore also announced in last 20 minutes that it is starting a possible ipo of its agricultural business and is cutting capital spending. As i said, the secondworst performer on the ftse, declining by 17 . Anglo american is down by 72 . They are racing to the bottom. Of glencore rebounded today. Francine thank you so much. Mark barton with the latest on the charts. Lets stay with glencoe in bank of america, the worst glencore and Anglo American. They told investors today that they can make money even at lower commodity prices. Lets bring in the global head of commodities at mccoury. When you look at a lot of these mining producers, they had huge balance sheets. They take so much debt, and no profits are diving. The solution is what . Divest, smaller cut costs . All. Best up in 2016, it will everybody trying to sell assets. The question is are there buyers . There will definitely be winners and losers. Glencore today has very aggressive cost cuts. Dohave seen miners everything they can to take costs down. I think we are expecting more from glencore today in terms of assets to be cut. There are still a lot of buyers out there. Francine they are talking about possibly putting the agricultural business ipo in that separately. That is a strategic move. Why . Because to get smaller and can be taken private . Because he can focus on the trouble . You dont really cut debt and that is what they need to do. Thats true. It is a nonsource of funding. Death it is an odd source of funding. It is on all source of funding. On the whole, it is a noncore assets and the need to focus on the main part of the business, which the will generate more revenue. I think they are leaving that to the larger houses and letting a separate monetary focus on that business. Francine in terms of i know you dont cover stocks, but anglo has huge exposure to copper. Which one is going to perform the worst . Is that even have an impact . The demandties projections continue to be lowered. By with a copper has been the most disappointing. And chinese demand has disappointed. In terms of underperforming commodities, its look terrible and we are in decline. Francine this is not a supplyside issue, or is it both . Ism told that demand increasing in china if you look at the number of cars selling. But there is just too much copper out there. Its true. The supply was added for demand growth, which didnt meet expectations. Other commodities are facing e challenges and there are this is now a demandside problem. Quite frankly, we are in the wrong type of Global Economic market. Emerging markets are suffering, and the Service Industry is doing well. The industrial economy continues to suffer. Francine are you pessimistic about 2016 . It is hard to see things getting better. For commodities you really need demanded to come through, and it is hard to see where that is going to come from. We are the wrong type of economy, and that continues into next year. s cuts will come and they will stabilize the market. Francine what is the catalyst . What does it take . Is this something that needs to happen . Is that emerging markets that need to start growing . It is emerging markets, and we are past where china can exhilarated cycle. Francine china, brazil . Hat will struggle to offset the slowdown in chinese growth. Cutsill see more supply and more stabilize markets and we will see more assets taken offline. The other thing to watch for is the oil price. Costs Oil Price Goes up, will steveepen. Francine when does it go back up . 2, 3 years, or is this the new normal . Oil price we think can recover around 2017. It will take a full year yet. For metals, many of them are looking at trading below what we consider the equilibrium, so in 2020. This will be a duration event, and for us, we have to look at who will survive. Next year will determine an awful lot of that. Francine thank you so much for coming out today. Next, what is next for vw as the ceo faces the music. Shares are volatile ahead of that update. In 20 minutes, they are getting 2. 7 . We bring you the preview, coming up next. Francine welcome back to the pulse, live from london. Lets get straight to the Bloomberg Business flash with nejra cehic. For about 2. 9 billion in shares and cash. Europes Biggest Hotel operator and is buying it from a group of billionaires. It has raised 60 million in its first bond sales to finance the 23 billion takeover of visa europe. It is the fourthlargest corporate Debt Offering this year. Glencore says it plans to cut net debt by 19 billion by the end of 2016, from a previous the low 20s. It was hit hard by the commodities crunch, been said it is studying the possible ipo of its agriculture business. The worlds biggest clothing retailer is reporting a 20 rise. Over 2come rose to tw billion euros and was boosted by a recovery in spanish consumption. That is the bloomberg is in . For more, head to the bloomberg terminal. Francine thank you so much. Ceo willutes, the vw hold his first extended News Conference since the emissions scandal. He is due to brief importers on the investigation. For more, lets get out to berlin. Volkswagen speaking to investors today . It is a big day, the first big press conference. A lot of questions remain unresolved at this point. People want to know how they will get out of this, the technical sector behind the cars, the fine they might face. These are the types of questions they will need to answer. We are set to interview him later, so look out for that. But really, people are paying very close attention to his tone, to his general mood, hows he trying to get volkswagen out of this crisis. They have been in this for about three months now, after taking a huge hit. We saw a little bit of good news yesterday when they said its not as bad as they thought with ome of the admissio emissions. Francine this comes after they eliminated part of the cheating scandal. What happened . What happened was that they came out with the release yesterday saying that these 800,000 cars they originally thought had co2 emission issues in fact seemed ok. Only a fraction of those cars have very small deviations, about 30,000, and even those might not be illegal. What looks like a second piece of very bad news for volkswagen essentially evaporated yesterday. They had taken 2 billion as a precautionary measure for possible fines or repair costs. It looks now as if they might be able to get away with that second hit, but lets not forget that they still have the diesel scandal, dieselgate as its called, reading down their neck. Reading down their neck. Breathing down their neck. We are expecting an announcement on how they view that. It is not like it is all good news. Yesterday was a piece of good dues that was very much welcomed, stock was up quite a bit, but there is a long road for the company. Expectingare we just a roundup . You were talking about things that are still unresolved. Do we have anything concrete . Its very hard to say. Judging from their recent announcement, we dont expect too much. They will probably talk a little bit about measures they have taken, possibly about the number of people they might have suspended. They had this Whistleblower Program that ended a couple weeks ago, where employees were encouraged to come forward, saying they think things are going wrong. This is a big part of the turnaround to make it a more open culture, to make people not afraid of revealing things that are going wrong. He might talk about that. Hard to imagine he will come out with something concrete and say we have now identified this or that, or we think the fines will be x. We think this is more of a round out press conference where he will say, these are some of the issues we see, this is our vision going into 2016. He has said that this will probably occupy them all of 2016 and probably beyond. Thank you so much. The Global Business editor in berlin. , argentina gets a new president up next, argentina gets a new president. We will talk the top political risks in 2016. Welcome back to the pulse, streaming on your tablet, your phone, and bloomberg. Com. Heres what were watching for the rest of the day. Argentinas new president gets inaugurated at noon local time. Since the former president is not going, we will get to that with our managing editor next. Then the investor meeting is today for yum brains, the First Time Since they decided to split off. Onn a central bank watch, Interest Rate in the snb. Jonathan ferro spoke to thats all coming up. Lets get more on argentina. Its a great story, too good a story not to talk about. The countrys new president gets inaugurated, but the ceremony doesnt like drama. The former president is refusing to attend. A group of lawmakers will also boycott the event. Lets get more on argentina and the challenges the new president will have. Our executive editor or International Development joins us now. I love this story because it plays out like a telenovella. The president is not going near him. They had to elect an interim president for 12 hours. We are in a pretty remarkable situation. Right now, argentina has an interim president. Level,his on one there was heavy squabble between the former president and the president elect, but on the other hand, if you look at what lies behind us, what you are seeing is a pretty fundamental battle between to alter personalities. Saying i amident is in charge, but fernandez, watching is doing here, even though it looks like a drama, she says shes not going anywhere. She is still going to be around. She can still run again. She is saying that she is not going away. She will remain in the background, and she will be there on the sidelines as he tries to push through these reforms. Francine the background to this if you look at the main objective, of making peace with the nations creditors. What does he have to do . This doesnt help the political mess. But it does feel like its a pretty strong mandate, and he has said right from the getgo, i am going to be doing a lot of things. He said that when he comes in, he is going to abolish currency controls. Yesterday, the central bank governor, he resigned. We are expecting the peso to slump soon. He needs to go to congress that will get legislation to help them negotiate for the holdouts. Obviously that is a very thing for international investors. Francine and it goes back to we are looking at the fed, a lot of these emerging markets, and with countries that arent going so great, on the trade between argentina and china. I want to talk about the political risk. There are loads. You have a pessimists guide coming out on monday. This guide looks at a lot of the things that could go wrong next year. Its really in a lot of ways intended as an exercise to get people thinking about all of these risks that can seem quite outlandish but can happen. You get, for example, to the point where you have a refugee crisis. Can Angela Merkel survive this . We are talking to a lot of strategists and economists, and it is pretty interesting what people say. Obviously there is populism in the u. S. , and that is something people are fascinated by. Donald trump, obviously his unending momentum is a concern to people. It would be interesting, if you dig down and ask people we talked a lot about oil, but a lot of people are worried about this, for people to strike out in saudi arabia. That could change the narrative francine we are worried about a spike in oil and with that would mean for the global recovery. In a world where china will be slowing and the fed is not raising rates, that could change the dynamic pretty quickly. Francine and brexit. Its interesting. You sat down and said people are concerned about oil, but also they are concerned about cyberattacks. That when you look at the possibility of donald trump, about Marine Le Pen possibly to become president of france, and the brexit factor. What you are seeing here is political disruption. Weve had the big question, is what we are seeing a shortterm event . We saw jeremy corbyn, donald trump, Marine Le Pen. Are the tectonic plates of western politics shifting towards a populist direction, or could you also argue that this is just noise . For example, who would have thought that David Cameron would go with the majority . Angela merkel, despite the problems, germany is still strong. Even if you look at the ultimate firebrand of 2016, alexis tsipras, he came in on a platform promising radical change, but pretty quickly after he became elected he had to bend the knee to the berlin in brussels consensus. The establishment is much stronger. Francine lets see what 2016 brings. Thank you very much. We are back in two minutes. Vonnie waiting for the fed, new zealand cuts rates for the fourth time this year. The biggest miner is reeling from commodity prices. Glencore cuts. Vw take center stage. Has his first News Conference since the scandal broke. Good morning, this is bloomberg television. Tom

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