Hello, welcome to countdown. Im mark barton. Bloomberg reporters are standing by, ready to deliver the stories. After much talk, the fed finally tapers. And nichols has the details from berlin. Asian shares on the move today. Airasiaorate news, plots its way back to europe. There are line height is looking with the companys dealings with airbus. Sochi,he countdown to covering the worlds most expensive games. The taper begins, the fed will trim its bond purchasing by 10 billion per month, down to 75 billion. Our kids have been waiting for it, they loved it. Hans nichols is here to explain it. Did ben bernanke finally get full guidance right . It looks like it. On his last press conference, bernanke convinced investors tapering did not mean tightening. That is the crucial part of what we got yesterday, the fed could actually be more dovish, in part because they are keeping short term Interest Rates at close to zero through 2014, well pass the time the jobless rate is below 6. 5 . Givingre certainly not up. We intend to maintain a highly accommodative policy. Nothing we did today was intended to reduce accommodation. We will still be buying assets at a high rate and increasing our Balance Sheet and holding onto those assets, and our guidance today, we strengthened guidance to make sure we expect to keep rates low well beyond the point that unemployment reaches 6. 5 . He also said that janet yellen fully supports his decision which is crucial. There was one dissent, in part because they do not think the asset urges his shows slowdown, so it was 91 the vote. It will be dated depended. Were talking about the fed having on their Balance Sheet, if they continue at this pace of 10 billion per month winding down, they will end the end of 2014 with a Balance Sheet of four oil 5 trillion, about 5 billion in the next round, 5 billion on the mortgage site, 5 billion on the asset side. What bernanke insisted his they would be looking at the data and it would be dependent on the data. Supports the committees expectation of progress towards its objectives. They are likely to reduce in further measured steps and further meetings. The process will be deliberate and dated dependent. Asset purchases are not on a preset course. One thing we look forward to in the coming months is not so much the jobs number being important but the commerce inflation number. They want to take a close look at the inflation, at least the preferred index by the fed. The october numbers were. 7 , far away, mark, from their two percent gauge. We want to look at inflation and the jobless figures. The jobless figures everyone has been obsessed about the last 2, 3 years may be less important in the future. Did noteason the fed taper in september was because of the political impasse in washington. Another hurdle cleared overnight with the Senate Passing the budget. That is good news for the fed as well, isnt it . Ben bernanke has put on his political analyst hat in the last year or so, if he looks at congress and tries to predict, in addition to what the economy might do, what the president might do, it is a dicey game. All of the talk about this being datadependent, he should have said it was also politics dependent because we have another debt ceiling vote in february. If that is a problem, you could thejanet yellen looking at politics of capitol hill as much as she looks at inflation measures. Thank you. Hans nichols live in berlin. Lets see how the asian bond markets have reacted to the fed tapering. Higher forrkets are a third day. Call it an early Christmas Gift for the outgoing fed chairman ben bernanke, the gains pretty much more pronounced in north asia. Looking at what is happening in the morning session in tokyo, Strong Performance from the. 75 . I 225, up 1 the hang seng index is going back and forth between gains and losses, but australia up over two percent. Helping the benchmarks. The dollar is stronger, most of the majors falling, helping seal some of these gains. In terms of volume, it is important to look at that, quite heavy as investors are taking the chance to get in, given that mr. Bernanke says rates will stay low for the longerterm and perhaps well beyond unemployment thresholds of 6. 5 . On the currencies, emerging market currencies are falling, led by the south korean won, the biggest drop in six months. Overall, a good day for asian markets. Chinese stocks falling for an eighth day. Chinas oneyear interest swaps slumped, as they refrain from injecting money. The shanghai composite the biggest losers so far, off by about one percent. Broadly, the shy bore index, a gauge of funding availability, that is in the banking system. That is trumping it today. The big concern is ahead of the ipo that will now be about to occur in china next month, there is a fear there is too little money chasing too many stocks. Liquidity is still tight within the economy, so the shanghai composite off about. 6 . Thank you. The European Finance ministers last night agreed on how to deal with failing banks. A big step towards completing banking unions. A between his in berlin. They heededoks like angelas advice to hurry up. She asked them to hurry up, and it looks like the European Union leaders will get on with their job today. Last night at about 11 30, finance ministers reached a decision. Certainly the ministers did not hold back on their rhetoric. If you listen to the Financial Services commissioner. Today is a vague momentous day today is a big momentous day. Many financial firms, it is unprecedented. There are two areas to look at. One is the resolution mechanism. It looks complicated because you will have a board that is going to decide on whether the bank needs to be resolved or move ahead, but the euro qb and but the European Commission can weighin and the finance ministers themselves can also vote on this. They are supposed to do it in 24 hours, but it is still very complex. As for a financial backstop if there is not enough money in the resolution funds, there is not a financial backstop. Countries will have to find the money themselves. The irish finance minister said the banks will eventually have to repay the money, but it still looks as if you have this relationship going on between the banks and countries. David, the ministers did not hold back on the rhetoric. Assuming this goes ahead, what happens next . Go to thes to european parliament. The legislation is not in place. What will probably happen is the ecb as the single supervisor will get on with doing it stress test. If the stress tests go through, you will have a certain amount of transparency. Countries and banks will no the order of the banks and maybe it will kickstart the intercountry lending market. If that happens, it might start a wave of mergers and acquisitions, which could lead to actually a shrinking of the european banking industry. Just to give a figure, the total assets of european banks since 2008, down by 12 . We may see the at continue. Thank you, david tweed. Airbus has benefited from the growing demand of travel in asia with another big order from the region. Caroline hyde, it is a sizable order . 6 billion in the bank for eads, which owns airbus, selling 25 a330s to asia air ax. Really, it has been growth in that part of the world. What should airlines in Southeast Asia with 1000 new aircraft in the past five years. This is where the likes of boeing and airbus have been focusing. The chief executive of airbus thought it was a nice present for this time of year. It is a nice Christmas Gift for us, with 25 a330s, from an airline which is used to it. Asked year they order just before christmas 100 other vehicles. For another decade we will see these a330s in production, updating them a little bit, making them carry more people, carry more fuel, more lightweight. And the new order means that air asia could come back to europe, which intensifies competition . Airbus,es, love times, theyre saying, oh no. Norwegian air is the only discounted airline traveling to asia and there have been no competition in several areas. Promiseteresting, the that it is coming from air asia, a330s widebody could help them return to europe. Are major points are still in china. Australia, the middle east. But definitely we want to come back to europe. It is a massive opportunity for us to exploit europe, which is not far away. Clearly the focus is still asia, but i want to come back to europe. They left in the first half of 2012 after their older aircraft were not making it efficient. He must be worried about getting burned again. Certainly, but they have big ambitions. They want to build the equivalent they wanted to be an emirate. In the headlines, the world does not want to wait, but the worry is expanding too fast as well. I have grown from two planes years, yet our margins have increased dramatically every year. The easy part is buying plans. The harder part is getting the money from the planes. The harder part is financing the planes. The most hard part is to fill the planes. I think we have done it carefully, it is aggressive, but well thought out. Said morernandes efficient planes would make it more comfortable in europe, and im sure European Airlines are cringing. Caroline heidi, thanks. Within a few days of the opening of the winter olympics, where the eyes of the world will be in sochi, with a 25 billion dollar price tag for the most expensive winter games ever. Ryan, what have you got . The eyes of the world are very much on russia in the run up to the games. Canada last night said they would send an openly gay delegate to represent them. Saidafter president obama he will not attend, but he will send an openly gay 70yearold Billie Jean King to lead the u. S. Delegation. All of these countries expressing their disapproval of russias antigay laws. Later, we will have the deputy economy minister of russia, talking to him about the reaction to that. Also asking the logic of spending so much money on the games. And we will ask him about tapering. Last time theyd tart they talked about tapering. All of that coming up later. With the start of tapering upon us, how will markets react . Our next guest says that volatility, not valuation, will drive returns. Welcome back to countdown. Says the feds decision to taper could cause a market change. Us, a chief executive with over 30 years of experience. Good morning. Surprised . Slightly. We thought if they do not do it by january, a serious mistake, so i guess it is nice to see they are ahead of the curve. A more modest beginning then i thought, but then there is a greater commitment to the data depended of 10 billion per meeting, which would take us to virtually nothing. Market reaction, s p record, emergingmarket currencies down, the 10 year yield up by six basis points. Where did the markets go from here . And it be a repeat of may june or not when they started to float the idea of tapering . I dont think it will be a repeat of that. The old one is the reaction to the 10 year yield. That is slightly surprising, but it is one days reaction. Numbers, goinghe through what will happen at some stage next year is there will be a spike in volatility. When that spike comes, the markets will selloff. I think they have done enough by the way of Forward Guidance this time around to reduce the threat of that in the first couple weeks of january. But at some stage, right at the bottom of its range in the last 20 years, at some point that will have to go up. When that goes up, the markets will selloff. What will prompt this volatility . That is the strange thing, im partly going to go something will happen and we dont know what it was. Almost by definition will have to be a surprise. But somewhere along the line, investors will need to react to what is the official fed policy, which is in 2014 they want the equity market to go up in the bond market go down. Sooner or later, bond Market Investors will get ahead of that and say, well if they wanted to go down, lets see how much they wanted to go down, and that is the sort of logic that gives you the spike in volatility. That might happen next year. Improving data, the Unemployment Rate at seven percent, creeping closer to 6. 5 , which does not mean they will increase rates, but what piece of data will precipitate this volatility . I think it will come down in the end to the expectations of Bond Investors themselves, and the fed is saying we want you to lose money, but slowly. That does not normally work as a strategy. You said, its a strategy that could preempt volatility. Can they control the yield curve, forward rate expectations . They can do that. One of the things, they have been much more dovish than explicitly dovish than expected. They have basically said they will not raise rates. They are basically guiding people into the sensitive area of unemployment being lower. It is basically for Percentage Points below where everybody estimated where they needed to pay. By equities, not bonds . At some stage, understand that will reverse very sharply at some stage during 2014. The problem is equities and bonds in the u. S. And pretty are carrywhere else related. When bond returns go down, at some stage equity returns will go down by a lot. That is for the market to decide. Is the quinces that no correlation. An idea of emergingmarket whens, how they have fared the notion was put forth in may and june of tapering, what is different this time . We have seen currencies fall overnight. How does the emergingmarket asset class fare in the next few months, through 2014 . Draw a distinction between commodity producers and noncommodity producers. One of the things we have valued repeatedly is in 2009 and 2010, a lot of money went to commodities, which is unjustified by metals. Qe. Hen and because of now that is being tapered, we expect more to come out. The big question is oil, but that is more of a supply issue. The commodity producing countries are under pressure, and by contrast north asia should be ok. At least that is our view. Thank you. Have a good christmas. Simon goodfellow, joining us. Up, a multibilliondollar deal with brazil. Find out why, next. Beat out boeing and a 4. 5 billion dollar deal to provide 36 jets to the Brazilian Air force, as the president says alleged u. S. Spying on their government is an affront to their country. A Capital Fund Manager is being convicted of inside trading. My call steinberg is the hedge funds longest serving manager. The fund paid a record 1. 8 billion. Ford shares fell the most in two years, forecasting a drop in profit next year. To 8ill earn 7 billion billion next year, estimated. Up, warming up for the sochi winter olympics. Find out what investors are up to ahead of the event, next. The top headlines, finance ministers of the European Union that have come to an agreement on how to deal with failing anks over the next decade, backing the idea of creating an agency to handle failing banks and agreed to a costsharing procedure. U. S. President obama is expected to sign the first bipartisan budget deal from a divided congress in 27 years. The senate cleared the trillion dollar measure with a solid majority, reducing spending cuts imposed under sequestration and slightly lowering the u. S. Deficit. Rbs is said to have become the dealersank to ban interacting with other banks. Jpmorgan and Deutsche Bank are taking similar precautions, concerned about investigations into rate rigging and currency manipulation. Hello, welcome back to countdown. Im mark barton. 50 days from the opening days of the winter olympics, the eyes of the world will be on sochi, with the 48 billion dollar price tag. The resort town will be hosting the most expensive winter games ever in february. Looking at russia today with ryan. The eyes of the world are already on rush in the runup to the game. He had the overnight candidate, canada saying they will send it openly gay candidate to represent canada in protest of the antigay laws after president obama said he would not be going, but Billie Jean Cain who is openly but Billie Jean King who is openly gay will be going. Oft is giving russia a lot attention for perhaps not the right reasons ahead of the games. Also a lot of talk about if it is wise to spend so much on the games, how it is actually costing so much and the business logic of that. Nader this morning in an hour and a half, president putin is giving his annual press conference. More than 1300 journalists will attend. Not everyone will get to ask their questions. His record is answering 106 questions a few years back. Last years first conference win on foreign a half hours last onrs press conference went foreign half hours. Looking to the are a lot of president putin, particularly on back of the decision what he thinks about tapering means for russia. They took a hit the last time. Economy is notan quite grinding to a halt, but it is way off the growth levels experienced in president putins first two 10 years of power. They are down in the Third Quarter 1. 2 , a big difference in growth levels. Absolutely, a consecutive quarter on quarter decline in growth. President putin said the reasons for this are domestic reasons. A lot of people talk about the need for reforms in russia, a crackdown on corruption. This is something they are very aware of and concerned about. One thing that has not changed is the price of oil is still very high. But that is unfortunately not helping the russian economy. Russias Investment Climate may be easing up. Russian deputy economy minister. Good morning, sir, thank you very much for joining us today. Good morning. I may, can start, if with the big global news of the last 24 hours, the Federal Reserve decision to taper its bond buying program. The you think emerging markets can withstand the beginning of tapering . In may and june, as evidenced by the rts performance in russia when stocks fell by 16 in just a month, emerging markets shook when the fed put out the idea of tapering. Can they whether it now that it has properly begun . Let me speak about the olympics and how we are prepared. Ok, lets start with that, then. How well prepared are you and is the price tag worth the money . I will tell you about money. Is it too expensive or not