It has just gone 6 00 in the morning. The chinese stock market a little less volatile today as a result of some of the government actions. They seem as if they are wanting to take on the speculators in the offshore market. That means the cost of borrowing surged hong kong, that to another record. It seems the intervention by the liquidityaining yuan in the offshore markets. Murderous ins terms of stamping out the speculation. The whole point about this is trying to bring the offshore yuan and the onshore yuan. This is the start of the day, offshore yuan and onshore yuan are coming together. The first time they have been at the same level since october of last year. Lets take a look at your morning market check. Where is the money flowing . It is flowing into the yen. By 2. 8 e yen increased versus the dollar last week. 7. 53. T around 11 today, a little bit stronger for the japanese currency. Manus oil is moving. We are precipitously close to the 30 level. Contract, volumes nearly 50 above the average. Deals overnment bond bond yields, 2. 16 , dropping back to a low. Anna lets get the bloomberg first word news. The cost of borrowing in hong kong surged to a record. The overnight highball client rateed, while the one week jumped to 32. 8 . The bank of china is said to have repeatedly intervened in the offshore yuan market. According to people involved, the central bank has been cracking down on speculators in a move prevented a move aimed at preventing arbitrage. He laid out reasons for why the worlds biggest economy may stay on a path toward higher borrowing costs. Relatively sluggish rate of growth in the United States by historical standards, but it has been enough to drive down the rate of unemployment in the u. S. From about 5. 6 at the start of the year to around 5 by the end of 2015. Our economists expect the gdp growth in 2016 is going to grow between 2. 5 between 2 and 2. 5 . Nejra declines in new york come after a 5. 3 slide on monday. Supplies show crude exacerbating a global glut. Hillary clinton is calling for a tax surcharge on americans making more than 5 million per year. It is a move that will lead to the highest top bracket income rate in the u. S. For 40 years. 1 will apply to just 1 50 of of americans. Manus thank you very much. Lets get out to david inkless. David in place. David the story today not so much in the equity markets. Intervention by the pboc in the offshore markets here in hong kong to drive down dollars. What you guys pointed out already was that this gap between the offshore and the onshore rate disappeared for the first time. That is a sixmonth chart. For the First Time Since october. That is the first time we saw more or less parity. Are the moneyt market rates here in hong kong. In other words, the cost to borrow renminbi here in the city, which has over which has averaged less than 5 over the past few years, is now at 66 , 67 . Pbocntervention from the has driven up supplies of renminbi in the city. Why would you borrow 67 . How do you make money . That is the big story in the offshore market. It has brought some sort of calm in the markets today. Overall, it is a better day. Not that most markets the most flattering of comparisons. Japan is trading for the first had to play a little bit of ketchup due to a sharp selloff we saw on monday. The yen had stronger levels compared to what it was. 225, overall. If you serve japan out, were just about flat on the regional benchmark. With that said, things do look better today, but obviously it is not unbridled optimism. It has been a turbulent start to the year for Chinese Markets. Frequent interventions by policymakers. Manus the countrys economy is set to grow at the slowest pace since 1990. Overall, what we have got, i think, is a divergence in the global economy. In the northern hemisphere, we have concluded deleveraging. , we are atat asia about the start of the deleveraging process. Right now, the market is overly focused on actives. We dont see enough from the fundamental side. Relatively weak, but not shockingly week. The selloff, i think, is not fundamentally driven. The regulators are getting more sophisticated. In theally believe medium to long run that this market will return. I dont think it is cataclysmic for the rest of the world. It is a negative. But we have to remember that china isnt that integrated into the global economy. Get the latest on those interventions with our Shanghai Bureau chief. It is reported that china has now intervening in the offshore yuan market. This is all about the onshore and the offshore and bringing them in line . You have to look at it in context of what happened last week, when the spread between the offshore and the onshore went to a record. Pboc, the central bank, is trying to manage this currency. Last weeks spread sent ripple affect through global markets. This is just another way which they are trying to manage this gradual depreciation of the currency. Or it hit a record. Effects, where is the largest impact going to be . Effect theost most direct impact will be on the sales of bonds inside of hong kong, the offshore yenden ominated bond market. With such high rates, it is spiraling down. What will the effect be on new issues . The yen depreciation over the past few months has shrunk the market. If this current reversal of the spread, the drying up of it may have an increased negative affect on the market in hong kong. Manus thank you very much. Anna our next guest says he continues to see renminbi depreciation in the coming months. Talk about your calls on the currency. These things are very much tied up with weight with what were talking about here, the central bank trying to stop speculators from shortselling the currency in the offshore markets. Do you think that the government will want to see a weaker currency . Why do you still think so . They have protested against that, having thing . Havent they . Fundamentals suggest that the yuan should be weaker than it is now. We think that the fair value of the yuan is probably around 690 or so, so you still have some room. The government has always been preventthe past to any speculation on the currency and would rather see a move that would be gradual. Manus it is interesting in terms of the spillover effects. This has ramifications for other Central Banks in the region. For the aussies, for the taiwan. There is a lovely line from Richard Nixons treasury chief in 1971, the u. S. Attitude toward nations it is our currency, it is your problem. Anna that was a long time ago. Lets you get such a big currency and big economy, it matters. It doesnt matter for other asian Central Banks because they look at the currency as a basket. In my change slightly their thinking. , theyample, in the rba have to take into account the tradeweighted index. Anna we spoke with one official saying that the large decline in the yuan being ridiculous. It is probably more something that would be small and gradual. That is probably what the aim of the authority in china, that is their aim right now. They dont want to see a sudden move in the currency. A course between what their aim isand the reality of what happening in terms of the global repercussions. Seeing andou are undoing of autonomics of abenomics. The spillover effects for other Central Banks is huge in terms of the ecb, the bank of japan, and the fed, isnt it . It has some impact. The fact that the yen has been appreciating so much will probably have some impact on the thinking of the boj. Theboj remains focused on focus domestically rather than the currency. They have been working a lot more closely. Anna when you see charts like that, i am returning i am referring to the one on the terminal here, does that scare you . Does that look like something frightening is going on or just currency intervention . We sent a clear signal to speculators do not shorten the yuan. But the question is, what will be the spillover effect . Could be a change in some of the business borrowing. Manus we have a lot more to discuss. Banks ght central 66 to borrow money overnight . Anna charles, thank you very much. Busy day ahead. Manus we look at france. They hold a policy conference packed with big speakers. Semifisher, and of course christine lagarde. Time,then, at 9 30 u. K. Manufacturing production. Tonight, president obama delivers his final state of the Union Address in washington dc. That is 2 00 a. M. In the morning. Talkinge will be newusively with the governor of the bank of france. A seat at the top of the bank at france. Still to come, were joined by the Aberdeen Asset management ceo. Up next, anna the price of ensuring debt. All the details to come. Anna welcome back, this is countdown. Said sales last quarter dropped 18 as it reported a net loss of . 39 per share. The impact of costcutting efforts at the new yorkbased company. The profit excluding items related to smelting closures. Asias richest man is poised to become the First Chinese person to control a hollywood film company. Legendaryd to by entertainment for 3. 5 billion in cash. Endarys credits accrued credits include Jurassic World and godzilla. 21 decline in the firms incomes last quarter. Managed 6. 3 billion as of december the 31st, down from 8 billion in september. For more on those stories manus dallas fed president Robert Kaplan has said oil woes will continue into 2016, so demand could increase amid low prices. 2016 is going to be another very challenging year for oil producers. Low oil prices translate into lower gasoline prices for consumers, and those lower prices helped to generate much stronger driving activity. We think there is going to be Strong Demand this next year. Lets bring back into the conversation charles, senior economist. You are listening to Robert Kaplan, he was in favor of the Interest Rate hike in december and he says it is important to continue along that path of normalization that has now been started, you know he is concerned about china. How many hikes you see from the fed in the year ahead . I think they will be able to do two hikes this year. One in june, another in december. It will depend on how inflation happens going into this year. Le view, in terms of what happens next with the fed and the dollar that is running on slightly shaking ground slightly shaky ground, isnt it . We caught up with one of the economists at ubs, and he said it is all about the flow of capital. Capital from southern from Sovereign Wealth Fund stopping, do we need to think about the global flow of money . In a way, having an economy in the u. S. That is slightly outperforming other economies you look globally, it is probably the economy where you have the most positive outlook of the big economies. It will continue to attract capital. The issue there is that we know the fed will react to further appreciation of the u. S. Dollar. They are concerned about the impact on the exports and inflation. If you have too much appreciation, it could actually slow down the hikes. Anna you say you know they will act if the delegates to strong. Manus hitting the pause button. Anna where oil comes into this conversation, i know you have been doing some work. You ran some numbers in november that talked about how factor we would get goinglateauing oil prices into 2016. We are looking at that kind of conversation anymore, are we . U. S. , you probably have headline inflation going towards 1 or so early in this year, so probably peaking early in january. You could be a zero, maybe slightly negative. Two . Did you say what the market is expecting. We also have to keep in mind that the fed doesnt focus on headline inflation. They focus on core inflation. You cant always say that it will be temporary. It should be. What happened this year, the basis rate we are expecting in 2015. Everybody before christmas was saying, get ready in january. Bloomberg. Com, we had Morgan Stanley joining other voices pritikin oil at 20. A shift from 70 to 50 was predicated on oversupply and questions and demand. This next one is being driven by dollaroil heading to 20 by boyles by Morgan Stanley on dollar strength. It will be very important for a lot of countries. It willike canada, matter quite significantly for their economy. Is, if that decline , itil prices is compensated doesnt change the revenues in local currencies. That has been happening in a lot of countries, the fact that the currency depreciated about 25 last year. Anna how does that play into the opec conversation . We just saw some conversations coming in from the nigerian opec team talking about how they think opec will look to convene some kind of meeting soon. This will have an impact on their budgets. Arabian cbs has climbed to the highest since 2009. Does that seem sensible to you . It is starting to be concerning for a lot of countries. Youre getting to the point where a lot of Oil Production is not suitable anymore. The question becomes, who blinks and stops continuing production . At some point, supply will have to be reduced. Gas oneked one guest last week the nigerians just building on that. The nigerians actually expect a 40 to 50 oil price band. They are hoping for the saudi price at the same level. Anna charles, thank you so much for joining us this morning. Manus still coming up on countdown, we had a cracker for you. Exquisite conversation. The only way to get better is to challenge yourself, and thats what were doing at xfinity. We are challenging ourselves to improve every aspect of your experience. And this includes our commitment to being on time. Every time. Thats why if were ever late for an appointment, well credit your account 20. Its our promise to you. Were doing everything we can to give you the best experience possible. Because we should fit into your life. Not the other way around. Manus it is 6 30 here in london. Lets get to number word news with nejra cehic. Surgedthe cost of banks bank bys chinas central is raining supply off the currency. Declined 53 Percentage Points while the oneweek rate just 22. 6 Percentage Points to 33. 8 . The peoples bank of china is the u. N. Ntervene in market since yesterday. The yuan market since yesterday. Painting a Stable Currency and preventing arbitrage. Has default and york came after a slight on monday. That comes before u. S. Government data which is forecast to show crude supplies expanded, exacerbating a global glut. Hillary clinton is calling for a text search on americans, making more than 5 million a year. Wages, as much as 43. 6 would apply to one 50th of 1 of americans. That is bloombergs first word news. Anna stay with us, as you have been watching the markets. A lot going on. Marketss you say equity , we are seeing trading more steady. We are seeing declines of the asiapacific index, a benchmark for the region. 1. 5 . E that down the shanghai composite gaining,. 4 . It has been choppy, that trading. Inhave seen declines as well japanese stocks on the first day of trading as they reopened after a public holiday. Brieflyhe shanghai fog below the 3000 level. Moving want to currency, the big story this morning, both in the yuan. D in the u. N. The the yen has been strengthening against the dollar. Last week in rose the most against the dollar since 2013. Is the most overboard since 2011. In other words, poised to fog fog . To fulco to manus lets talk about china. Says chinas rebalancing presents a challenge for the rest of the world. They have embarked on a transition for an order for a more export based economy. That are all challenges are going to take years to address. These are not cyclical issues. The world is going to have to adjust to the fact that slower chinese growth is going to othery impact economies around the world. Anna joining us is martin gilbert, ceo of averaging assets. Management. Erdeen concedes that what is happening in china is going to take adjusted u. S. Growth. How many hikes do you think the fed will instigate . I am not sure there are in any rush to do anymore hikes. If they did not do the first one, everyone would have thought what did they know that we do not know . Then we would have seen real nervousness in the markets. The currency will strengthen further, slowing growth in the u. S. For ore like two then more than more like to than for. Manus we have seen huge volatility in china. Huge manipulation. As far as emerging markets, is it the fed that is priced in . Or chinas disruption . Martin i think both are priced in two emerging markets. Both the fed hike and china. The key worry is china. How long is it going to take to restructure their economy and the effect it is good to have on emerging markets. It is a tough environment being an emerging market asset manager , because we are paid to manage mark to manage money in the emerging markets. They are still taking money out. Anna gives an update on how quickly that his desk give us an update on a quickly that is happening. Martin i dont think people have gone back to work yet. We have not seen much yet in the first week. People putting money in the first week. It is too early to tell. What sentiment is going to occur in the emerging markets. A lot of people who have money invested in emerging markets have already taken it out, way back in 2013, 2014, 2015. Manus part of those withdrawals were concerned were concerns all across the board. The Fourth Quarter was about 12. 7 billion. We talking about 30 oil now. Expect more can we Sovereign Wealth Fund withdrawals . Is this the bottom . s Morgan Stanley right, is 20 on the table . Martin it could go down from here. The Sovereign Wealth Funds have built up these reserves. They are requiring them now to fund their budget deficits. We have seen some of the middle eastern once. There are reports for the first time that norwegian Sovereign Wealth Fund will be dipping into their reserves as well. Remains, they are going to take more money out of the markets. Manus that was the Fourth Quarter number, 13 million pounds, could get much worse deck of can you put it in perspective . Martin you and i will end up in prison if i answer that question. It is still tough at the moment. Hopefully it will improve from here. Anna how patient are you with emerging markets . D. C. Any opportunities back up do you