Transcripts For BLOOMBERG Countdown 20160223

In london. Whichtalk about the bhp, puts commodities very firmly in the center of things. Is the end of the route insight . How many times have i asked that question in recent months . Is this the end . 100 Day Moving Average is insight after a little rally. Taking it back up toward the 100 Day Moving Average. Some investors are suggesting that this could mean that we are that we have some more positive moves to come. Remember, futures of copper had actually rallied more than 9 from their six year low in january. Manus we seem to have passed those crisis moments. The question is, can we sustain it . We have iron ore, oil on the move as well. Boy ofe was the whipping commodities in 2015. Iron ore futures hitting a fourmonth high in china. When you have is the highcost producers in china dropping out. That story on the bloomberg. Aussie exports dropping by 10 . Subman sachs talking about 40 until 2018. Brent oil down 1. 7 . Anna just to go against the grain slightly, that one at the 1216 per ounce we are trading at. Lets get some breaking news. Of thatthe early signs income coming through at 978 million. That is ahead of the estimate, but the bigger news is that they from july a new ceo the first. Bhp has made a cut to its dividend, lowering the dividend for the first time in 15 years. Tumbled 92 . Ofits share prices fell by more than 40 over the past 12 months. David camerons campaign to keep britain in the European Union has been given a boost. 36 leaders of the u. K. Of the u. K. s 100the Biggest Companies agree. Camerones after david fought against Boris Johnson who said he would campaign against staying. We see the influence on tory funders on the Prime Ministers status, not for britain baba but for the city of londons interests. It is the same interest that causes the chancellor of the checker 2 chancellor of the exchequer to go to europe. It is necessary to protect the rights of noneurozone states, eu not to undermine regulations of the financial sector, including the board rooms in the city of london. Pharmaceuticals says it will restate some of its past earnings. That is after a Committee Valeant says about 58 million in revenues previously recognized in 2014 should have been from subsequent periods. Mark zuckerberg effectively backed apple in its privacy battle with u. S. Authorities in a speech at the conference in barcelona. Have backf tech firms to the refusal. Apple says it will have a provision for the future, but the u. S. Government says it is a oneoff requests. Mr. Zuckerberg were sympathetic with apple. We believe in encryption, we think that is an important tool. Honestly, people will find a way to get anything. I think it is not the right thing to try to block that from the mainstream products that people want to use. I think it is not going to be the right regulatory or Economic Policy to put in place. Anna global news 24 hours a day powered by our 2400 journalists in news bureaus around the world. Manus lets get up to speed on these markets. Haidi lun is standing by in hong kong. It has been a fretful sort of day. And thent of the gates gave back some of those gains. One researcher this morning saying, if there has been any trend in the way that the markets have been going in 2016, it has been that there has been no trend at all. Japanese and south korean shares closing it just a few higher. Same story we have been seeing. Yen has gone up, gold has gone up. Yuan, we setting the guess that about six weeks. That really has cast into doubt the sort of Economic Outlook of china and the stability of the currency. Shanghai is down by 1. 7 . Mainland markets yesterday closing at their highest in over a month. We did see Energy Stocks getting sold off again. Having said that, we have seen some quite nice gains. It has been a big day in terms of earnings. One bright stock was gaming gamington it stocks listed in hong kong. Jpmorgan saying that revenue numbers from the cow are expected to be upbeat for the first time in quite some time. Wynn macau up by 1 . Jakarta under fire again. U. S. Investigators announced another investigation. I think investors were hoping for dividends. Im sure youre going through that, but that stock is up by 2. 6 despite fairly ugly print on those results. Manus and anna, back to you. Anna thank you very much, heidi lynn. Reporting a 92 drop in profits. James foley joining us in the studio now. Good morning to both of you. Ryan, lets come to you first. The top line on bhp, the focus very much on what these businesses in the sector can do to get them out of the slump. They are effectively doing two big things. Ne is a dividend cut they cut . 16 per share. The market was looking for . 31 per share, down from 32 last year. As the biggest cut since 2001, when bhp and billiton merged. You have to go back to 1988 before then to find another dividend cut. There is room to save. Guidance fort the this year, it had been 8. 5 billion, now it is 7 billion. In the last six months, down 7 . In 2017, they want to go from an earlier forecast, about 7 billion to about 5 billion. Manus they also spend a heck of a lot of money building up u. S. Shale. They built a new find billion dollar pipeline. Ryan i think it is interesting. You look at the net loss, it was it5. 7 for the first was about 5. 7 billion for the first half. A lot of it was already anticipated, and namely the impairment when it comes to bhps assets in the united states. Of 7. 2the tune billion. Marco, which is kind of what the gulf spill was for bp, they wrote that down by 1. 2 billion. Basically, they made a little bit of money, but they wrote down an awful lot. Lets give this conversation a currency flavor and talk about some of the emerging economies and their reliance on commodities. You see anything in the Commodity Markets that gives you confidence in the commodity related currencies in the emerging world . These economies really are hits. The canada, the australia, norway, they are a little bit more diversified. Back at the emerging world, these are one horse towns if you like, and they dont have a lot of other industries. These horribleng environments for the central bank with slowing growth and rising inflation. Manus mrs. Aussie dollar and volatility. You have the aussie dollar here. The view is that we are going back towards the 100 Day Moving Average. Traders have got bullish on this currency for the First Time Since 2015. My question to you is, do you think we have gone through the eye of the storm . They are inextricably linked to iron ore, which ultimately is related to china. Jane i am very nervous, indeed. Nowfact is that they see it as a proxy. The Australian Domestic fundamentals, the labor market has been really resilient, the australian economy is doing well. But i am very skeptical of this. In terms of revenues coming , very much linked to china, to the Steel Industry coming taxes are lower, incomes are lower, and the Australian Labor market has been really good. There has been no Wage Inflation. One of the reason for that is that they are losing mining jobs and getting lower paid Service Sector jobs. The lack of Wage Inflation is a problem for australia and it has been for a number of years. It is certainly a big problem with australia. I think there is a risk that the central bank could cut Interest Rates. What is interesting is, over the last few weeks or so, people have been looking at bhp priceon, that the share for bhp billiton started to track oil much more than iron ore. Manus that is what it is linked to. Ryan my question would be, on an fx fronts upwards. Rning sorry, that is the iron ore price. It is actually not reacting as much to the iron or rally than it is to the ore crunch. Ryan people are saying that the sacred space to be in now and because of all the money they saved with dividend and spending cuts they have money to go out and buy some assets. Currencya particular that you think should be targeted to play . Jane when the market gets stressed, we see a lot more correlations. We saw that in the Global Financial crisis. Australian dollar is also more correlated to oil. Correlationsse when we have a correlations. When these markets begin to break down with these correlations begin to break down is when markets begin looking at fundamentals. If youre worried about china anna one degree of separation away from the china story, commodities. S jane one thing we have to bear in mind for the loony, is the market did get very, very short. The market went along aussie. That worries me. Manus that is the First Time Since 2015. I think that is one of the reasons why canada has done a little bit better. I think it is still quite vulnerable. If you like oil, by the canadian dollar. Canada, longerterm, it should have a little bit more lookction, because it does inwardly to the u. S. As australia looks to china. Anna thank you very much. Manus we are going to be speaking to the bhp billiton chief Financial Officer on Bloomberg Television later on. He will be speaking on surveillance at 10 10 london time. Anna speaking of things coming ahead in the day, we get a reading of gdp at 7 a. M. Gdp time, followed by iphone sales. Manus at 10 00 a. M. , bank of england governor speaks before the lawmakers. How many times we mentioned the word brexit . Anna at 11 15, we hear from the smb governor on Monetary Policy in the euro. This afternoon manus it is all about order all about oil. Anna how will brexit risk impact the u. K. s rates . Anna welcome back, this is countdown. Reportediss three has reported netas income in the quarter rising 938 million. The Company Also Announced a new chief executive officer as of july 1. The first for your loss in almost two decades as the said thees trader price of coal may remain low for an extended. An extended period. Shares tumbled over the last six months as resource prices fall. Extended trading new york after forecasts for the Current Quarter missed estimates. The maker of Wearable Health devices expected sales between 420 million and 440 million this quarter. Fitbit has lost about 45 of its value this year. The former jpmorgan trader who became known as the london began when his unit making huge losses in 2012, says bywas instructed repeatedly managers to execute the strategy that went awry. He says he rejects to the whale nickname. Anna the week began with a bang. Sterling off a cliff by throwing his support behind an exit of the European Union. Manus the Prime Minister cameron hit back in parliament, emphasizing the banality of the brexit decision. This brexit is not an invitation to rejoin, it is a process for leaving. I have known a number of couples who have begun Divorce Proceedings, but i dont know any have begun Divorce Proceedings in order to review in order to renew their marriage vows. Today is bank of England Governor Mark r mark cairnss turn. Manus lets bring in jane foley, she is the jane foley. Sparring has begun. Give me a sense of the market. We see these huge lurches lower. What i want to know is, how well positioned are we . People ink a lot of anything you can be really sure of is volatility. It is very high and likely to remain very high. I think the market will be watching the guinea polls. I think it certainly could fall further. We know the opinion polls werent that reliable ahead of the general election. The other thing is that we are told that around about 1 5 are undecided. It could go either way at the very end. Anna what is your target around the europound right now . You can caveat that with all kinds of circumstances like paying in and then leaving. What kind of thinking goes into how you would leave at how you would put a value on this . Do go for an if we bet, i think we could looking a lot higher. 85. That said, the euro is being dragged lower yesterday, too. Course, there is a lot of question about what will happen to the eurozone. Do we have to question the whole existence of the eu if there is an exit . That is another part of the same argument, a very interesting one. Move imuch purer think we are looking well beyond 135, 130. Anna if they actually vote for a brexit . Jane yes. This, ithat, tweaking is, have we become too pessimistic about the fed and u. S. Interest rates . Perhaps the u. S. Can hike Interest Rates this year . That would exacerbate any potential move lower on the brexit. Manus this is the analyst estimates. They are nowhere near you are saying. This is for the third quarter. We have slicing and dicing in terms of the estimates. You would say, perhaps the analysts are nowhereecasts near the ones i mentioned, too, because my assumption is that we remain in. Forecasts is that in 12 months to return to 0. 7. My forecast votes for cable were part of the assumption that we remain in. What im going through is the risks if indeed there was a brexit. If you areurse, looking to generate inflation, having a weaker currency is one way to do that. Do we see the pound, even running up to the vote on june 23, do we see the pound getting significantly weaker to trigger inflation . Concern,is a secondary but it is imported inflation. What we really want is demandled inflation. , when weew years ago had a vat, inflation was very high. The money that we had left in our pockets was declining. This will be the same sort of effect. Maybe exporters will get a benefit, too, but import inflation is not what we want, we want demand inflation. Manus should they be tempted to options on sterling as a high volatility trade. . Jane i think the problem now if you wanted to buy an option in sterling is that volatility makes it very expensive. For many corporates trying to hedge, they may have missed the boat already. All agility is going to be difficult for people trying to hedge at this point. Anna like you very much, jane foley on brexit. Joining us from rabobank group. Manus the yen marches on. More to come on abes deliberation and the governor of the central bank of japan. What is his next move . When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. No annoying hold music. Just a real person, real fast. Whenever you need them. So your business can get back to business. Sounds like my rides ready. Dont get stuck on hold. Reach an expert fast. Comcast business. Built for business. Manus it is 6 30 in london, 7 30 in brussels. Billiton has made a larger than expected cut to its dividend, lowering the payout for the first time in 15 years. That is as the World Biggest Mining Company aims to protect its Balance Sheet and Credit Ratings amidst a price collapse thats offers cap profits tumbled 92 . Share prices have fallen over 40 over the last 12 months. Keep camerons campaign to britain in the European Union has been given a boost. U. K. s 100f the Biggest Companies have signed a petition agreeing. Boris johnson said on sunday that he would campaign to leave the bloc. The worlds biggest money manager is warning Bond Investors that they are not prepared or the Federal Reserve to raise rates. In january. blackrock, which has 4. 6 trillion in assets, says the fed is likely to move in 2016. A Board Committee reviewed the u. S. Drugmaker. 58 on says about valley on says revenue should have been brought in subsequent periods. Renewed talks for a ceasefire in syria will start on saturday. Killed 260 thousand people and created a refugee crisis straining europes borders. Armed opposition groups who want to take part must confirm by friday that they will abide by the cessation of hostilities agreement. Bloomberg, powered by 2400 journalists in news bureaus around the world. Anna we just got some breaking the french out of food company danon. Therefore your earnings rising. Yogurt profitability rising. The milk price has been one thing of late helping that business. Sales beating estimates. The yearguidance for ahead, they see 2016 like to like sales up. It is interesting, because in november, the company predicted sales growth would exceed 5 by 2020. We will see how that goes down with investors. Manus it is interesting that they talk about deflationary pressures. Economic conditions will remain volatile with deflationary Consumer Trends in europe. That is Mario Draghis challenge personified. Anna what have you got . Nejra im starting with the pound. We are seeing a second day of declines for the pound versus the dollar, but also versus the euro. I have sterling here against the dollar at a 2009 low. It felt to that low yesterday. Volatility at a 2007 high. That has kept rising today. I want to talk about another thing, which is the euro. There is a sense that if the pound falls, it could take the euro with it. This is because, if we do see a brexit, there is a sign this could be very bad for europe as well, not because seven of the nine seven of the euros largest trading partners are in otherk. , but also maybe eu members wanting to renegotiate, too. What i have here is eurodollar options, six month risk reversals. What it shows that the premiums for options protecting against a decline in the euro against the dollar, compared with those insuring against an increase, that premium had the biggest jump in more than a week yesterday. It is moving down on the chart, but that is a jump in the premium for protection against a decline versus an increase. That is according to six months risk reversals. Manus thank you, very much. , senioring jane foley currency strategist at rob a ank back in. Abab onaw this story yesterday the bloomberg terminal, i want to talk about yen. We have a highfrequency tractor, and this is a problem for abe. Our highfrequency tracker at bloomberg may make an update six times and a quarter. Japan is on its knees. What do they have to do . Jane they have tried negative Interest Rates now, and what they get is a stronger yen. The reason for that is china and the global on market certainty that Global Market uncertainty at the beginning of the year. Difficulty, therefore, for japan, or at least the bank of japan, is that almost everything they can do now on Monetary Policy is it going to have an impact in less the appetite improves. They need to see better growth in china, but will they get that . Maybe not. Manus is the lurch lower. My question to you, where is dollar yen at the moment, 1. 14 . To get from their back to the 1. 25 levels, that is a colossal jump. Should necessarily be focusing too much on dollar again. We need to focus on the Effective Exchange rate. It focuses not only on the dollar yen but also the yen renminbi. China now is their biggest trading partner. If we look at the bank of japans measure of the affected Exchange Rates. Because we had several years of the renminbi strengthening, it has been dragged stronger by the dollar. Actually, the Effective Exchange rate went to its lowest level since 1973 last year. Reallys still benefiting from Exchange Rate weakness. Almost every measure, the yen is undervalued. It is still relatively weak. The rest of the g7 would be very unhappy with them. ,ight now, they are seeing certainly to get it back up to 120 five dollars, he would need to see the dollar strengthening significantly. Anna talking about the dollar, blackrock, the worlds biggest money manager, they do see some strengthening in the u. S. , and they have been warning that they are not ready for the Interest Rates that they believe the fed will be introducing in 2016. We were more dovish than everyone last year. At the beginning of last year, we didnt expect the fed to hike until december. For now, we are still going for two, maybe one, may be in september, maybe in june. Had cpi data. We we are seeing Wage Inflation move higher. Yes, it is lower than the precrisis levels, but we are seeing that move higher. If we look at the tightening in the labor market, we are expecting some of that to come through. Manus you think the dollar yen is perhaps a little bit underpriced . Jane precisely. And that, obviously, changes things, makes it a lot easier for the likes of draghi to try to get a little bit of Exchange Rate weakening. And we are going to get that number from the u. S. Friday, i think it is. Manus 1. 2 . Anna 1. 2 . Jane, thank you very much. Mark Facebooks Zuckerberg has probably back to apple in its privacy battle with u. S. Authorities. A number of tech firms already said to support apples refusal to unlock a terrorists iphone. Zuckerberg we are sympathetic with apple. In encryption. We believe that is an important tool. Obviously, people are going to find a way to get it anyway. Think it is not the right thing to try to block that from the mainstream products that people want to use. I think it is not going to be the right kind of regulatory or Economic Policy to put in place. Anna bloombergs Caroline Hyde is at the mobile World Congress in barcelona this morning. Take us through the highlights for you. It really was a wideranging conversation. Awful audio situations throughout. Technology never seems to work at technology conferences. Seeing subjects debated by zuckerberg. Primarily, his own wealth. River the 99 to give away, why wasnt that a foundation . He says flexibility. Free accessnned the to websites like facebook and social media. Notably, the shift to video, 360 degree video, and what is needed from the Telecom Equipment makers and the operators. He needs them to be collegiate. This is something we actually spoke to jason taylor. He is the head of infrastructure for facebook. Building infrastructure is a fundamentally hard thing to do. If we solve a problem through this project, or say an operator solve the problem and then they share it through this process, the odds of their neighbor, maybe one of their competitors actually seeing that same bottleneck are probably really low, but that idea or that particular solution will probably find a home somewhere else over the globe. Caroline facebook working with the likes of Deutsche Telekom and nokia, trying to get these 5gs to Work Together to make a reality. Also, of course, Mark Zuckerberg bikini celebrity of the technology world. Zuckerberg the key celebrity. Teaming up with Georgia Telecom with Deutsche Telekom. It is called i am plus. He launched a voice operating system called anita and a program called dial. This term came from folks who dont make clothes. Gucci called them bracelets and cuffs. They dont wearables. When you put technology in them, do you change the name . Technology goes to a place where things arent visible. It is a things you touched, it is things you talk to. Technology is not just things you put in your pocket or your bank, it is going to be things that you where. Caroline the ever fashionable will. I. Am and his new launch of an operating system called ineeda. Back to you guys. Manus plenty of, left on wednesday. Anna 6 42 in london. This low rate environment. We will be in berlin, next. Anna welcome back to countdown. Lets get the Bloomberg Business flash. Has been report has reported fourthquarter profit that beat estimates. A newmpany announced chief executive officer as of july 3. Raised its midterm revenue reached as orders record. The maker of missile guidance systems saw growth in deliveries that led to a 44 surge in profits. Bae systems as military budgets in the u. S. And europe are set to recover after cutbacks from the recession. In theted 26 million accident lets customers book private jets from smartphones. Jet the new funding, smarter plans to increase operations in the middle east, europe, and asia. Manus the world is full of negative rates, and getting more negative by the day. The biggest names in the privacy act private equity business are gathering in berlin. Anna lets head out to hans nichols to find out. Joined with alex of octopus ventures. We will talk about what is happening here at the conference. What is your sense of where the opportunities are for Venture Capital funds in europe . I think you see over the past few years a sort of change in the whole european ecosystem for entrepreneurship. That is really exciting for european investors like ourselves. Talented bunchly for norse were building really big businesses. By big business, i mean, can they address global audiences . Maybe they started europe, but expanded to the u. S. And asia. It hasnt looked outward enough, it has been too inward looking . I think it has been this change since really the financial crisis, the desire of students and graduates coming out of the Business Schools to go and join startups. They see this opportunity. There has been a mindset change in regards to entrepreneurship. That is what has been a significant difference to the time before the financial crisis. Hans we think of the financial crisis, we think about exposure, we find out who is swimming without their trunks on. When you look at some of the valuations taking place in silicon valley, and look at some of the writedowns, is there a sense that you are overexposed and dont actually know what the value of some of these companies are . It is veryi think important to recognize the difference between some of these Large Businesses with significant valuation. Uber at 62 billion, how does that affect . You see a number of investors come into the private marketplace, who are not necessarily Venture Investors who fueled that valuation. If you take a step back and look at what is happening in london, also in berlin, were investing in Small Businesses utilizing technology to change the way in which we do business and change the way in which people live their lives. Those Small Businesses have an opportunity, at this time, to really move things forward and change the way we live. Hans so Small Businesses, you dont think are overvalued, but maybe some of the big valuations are a little distorted . Alexander i think thats right. We are seeing what i would describe as a deflation of the bubble at the higher end. The smaller businesses have that opportunity. A 10 Million Pounds sterling business or 10 million business , does that make a huge difference . It does if you are going to sell it for 10 million or 15 million. Hans i will take your point that at uber, they are driving with their shorts off. Alexander you can see how they had reduced valuations of some of their investments. That is clearly in response to the market conditions. Hans are companies staying in the Evaluation Phase too long . Alexander i think the biggest thing for europe is, how does it leverage off this ecosystem that has been developed at the early stages to move into that sort of scale up, and how do we create 1 billion businesses . That is the challenge. ,e have seen some of them germany with regards some of them, so how do we see those businesses go through and scale effectively. Hans that is the question for berlin and london or is that a paneuropean question . Alexander i think that is a paneuropean question. Where you see a difference to, say, silicon valley, you have a true tech come in london, berlin, stockholm, to a lesser extent in paris. It is around the cities. Hans can you tell a Venture Capitalist with region he is from by the way he dresses . Alexander i think it was really interesting yesterday that they had their first ventures day, which i think is a great initiative. There were a few of us in what i would describe as more genes and jackets. Andink it is also jeans jackets. I think it is also fair to describe the Institutional Investors might have been in a suit and tie. , you, as we move forward will notice i am in a suit. Hans we wont go below the table because that would be fair. One final question. In this low when we look at this low Interest Rate environment, what does that do for the Venture Capitalist world . I think the whole question is, is this an attractive asset class for people and can you see good returns . I think the answer, resoundingly, is yes, you can see that from the Venture Capitalist asset class. Ors are you going to uber cab . Im going to uber. Hans i thought he was going to take public transportation. I always abide by the law. Hans nichols, available for all your public transport questions. Manus we had hsbc more than 20 hours ago no more than 24 hours ago. Anna Standard Chartered even more exposed to asia. What can we expect . Darin joins us now from hong kong. What do you think the numbers are going to look like more than an hour away from now . Good morning to you. Obviously, some of the numbers we have seen from the analysts not looking all that great. Without a look at some of the headline figures. 15. 9 billion for your revenue, down from about 18 or so in 2014. On the pretext line, down about 60 . The backdrop to all of this is what is the chief executive officer trying to do in his attempt to reenergize the profits at this global bank . He came out in november and announced quite an ambitious restructuring plan, which included the restructuring of some 100 billion u. S. Dollars in risk asset. He is trying to cut something in the order of 15,000 jobs. It really is a similar story to what we have seen at all the other global banks, including hsbc. The stock has come off quite a lot, especially in hong kong, down more than a quarter this year. Timestrading about 0. 4 below the value of its net assets. It is not the entire industry. Talk us through the underlying causes of the expected decline in Standard Chartered. Yesterday, this story from hsbc, their quarterly loss, they were worried about bad loans. What is going to be the driver behind these numbers . Will seebviously, we some similar trends. I mentioned the restructuring and how they are trying to exit some underperforming businesses. Obviously, that will play into topline revenue. Been a trend, not only with hsbc, but with all the other global banks recently that have reported earnings. Been really interested in what commodities exposure looks like. Certainly, or Standard Chartered, that has a big bearing on his tray finance business here in central asia. Business trade finance here in central asia. Shipping and supplies in this part of the region. Certainly, they have been impacted. That, obviously, has flow on effects for loan repayments. The last reports we have had from Standard Chartered, there has been a lot of focus particularly in asia and out of india, where we have seen a rise in npl. Those are some of the things the analysts are looking for. Manus thank you very much for the latest on Standard Chartered. We are going to bring you those numbers right here on bloomberg tv a little bit later. We are minutes away from the start of trading day. Minister french prime speaking on the radio talking about reform. Manus we have u. S. Equity futures just a shade lighter. Global rally falters. Stumbling stocks in asia. The yen strengthens. Anna sete pcs dividends. Profits at 92 . A tugofwar between the Prime Minister and the mayor of london. A governor steps in. Testifying before parliament this morning. Welcome to countdown. Anna welcome to the program. 8 00 if you are watching and france. 7 00 in london. 3 for the fourth quarter, quarter on quarter numbers. In line with those surveys and previous announcements. Consumption and investment led to the german Economic Growth story. We saw german Capital Spending rising by 1. 5 in the three months through december according to the breakdown that comes through with these numbers. Consumer demand rose. 3 and Government Spending jumped 1 . 6 . Ts declining by you see the push and pull between the ms stick and external factors. The Interest Rate, record low unemployment. Europes largest economy. We are waiting for numbers from the hotel sector. Manus lets get a little bit through here. A special dividend. If you are shareholder, you have a 1. 5 billion special dividend. That is a payment to shareholders. In terms of the full year basic 5. 20. S picture, we are seeing a very special dividend coming through. Some change in the top in terms of directorships. Jennifer lang set to retire. Management shopping. Shareholders getting a special dividend on intercontinental. Anna in the show that follows live on on will be the move at 7 30 a. M. Lets talk about these markets. Manus we have a slightly heavier open to the markets. We have the chinese moving lower in terms of the yuan this morning. The wave of the rally we saw across the Global Equity markets. We saw losses for the start of the year. That has waned a little bit. Oil is a little lower. Money is coming out of the yen. We are set for a lower open. Anna the fall is weighing on demand. Billiton has made a larger than expected dividend, lowering the payout for the first time in 15 years. That is the worlds Biggest Mining Companies seeking to protect its Credit Rating among a price collapse. Bhp share price has fallen by more than 40 over the last 12 months. David camerons campaign to keep britain in the European Union has been given a boost. 36 leaders of the 100 Biggest Companies have signed a letter saying that staying in would be best for the economy. That came after the Prime Minister fought back against the mayor of london, who said sunday he would campaign to leave the block. Meanwhile, the leader of the u. K. Opposition and labour party accuse mr. Cameron of putting the interests of bankers above british people. We see the influence of tory Party Funders on the Prime Ministers special status, not for britain, but for the city of londons interest. Its the same incentive that caused his friends, the rush to europe with an army of lawyers to oppose any regulation at the grotesque level of bankers bonuses. Its necessary to protect the rights of noneurozone states, eut not to undermine e. U. Wid efforts to regulate the financial sector, including the board room pockets stopping in the city of london. Pharmaceuticals will restate some of its past earnings. The relationship with a mailorder firm as he. 58 million in revenue previously recognized in 2014 should have been booked in subsequent periods. Thanjournalists in more 150 news bureau around the world. Check in on the asian markets. Heidi lynn is standing by. We have seen the chinese move a little bit on the yuan today. Heidi read into it what you will. Certainly, investors are wondering if this is an indicator in terms of declining confidence, that weaker currency quiet a bit of weakness. This is where we are sitting. Shanghai comparing earlier. 8 . S, up. 8 Percent Crude Oil affected. Prices began to drop into the afternoon session. Pretty good gains coming through from southeast asia. In terms of the major indices, look at tokyo. Down. 4 . Profit taking happening around the region. There is a lack of direction and people wondering whether the rally weve had over the past 10 days really has legs. Tokyo stock 15month low earlier this month. T 3000i approaching the level. A rebound of 10 there as well. Investors taking money off the table because in terms of the outlook for china, the u. S. , uite aa lot of data q lot of data this week. This is contributing to losses, particularly for japanese equities. The yen trading at the 112 handle. It bit into exporters today. Gains in gold again. Concerns over quality and safety, of course. The weakest and more than six weeks. 6. 5281. Downside for the chinese currency. A little bit move tends to affect the market somewhat. Anna thank you very much, haidi. Sterling was sent off a cliff. Thee minister cameron hit back in parliament, emphasizing the finality of the brexit decision. This process is not an invitation to rejoin. It is a process for leaving. Speaker, ive known a number of couples who have begun Divorce Proceedings, but i do not know of any who have begun Divorce Proceedings in order to renew their marriage rows vows. Manus today, its the bank of englands governor who speaks for the First Time Since cameron returned from brussels with the deal. Risk affect brexit the rate pass and sterling . Ceo e are joined i the by a ceo. Thanks for coming in. Conversation,exit this permeates the Investment Decisions you are making at the moment. Perhaps you try and work through it. We try and look through it and see longerterm perspectives. This will have longterm consequences. It is something we do have to grapple with. Markets dont like uncertainty. This creates uncertainty. There going to have referendum reasonably soon. Leavethink a choice to would still create further uncertainty beyond it. The uncertainty would be ongoing. From a selfish market perspective, dealing with uncertainty, putting it behind you, it is nearly always a good thing. I would like this to be resolved very quickly. The fastest way for it to be resolved would be to maintain the status quo and stay in. Manus one of the big news pieces yesterday was about the slap that sterling had across its relative relationships. For equity investors, there can be that can be a force for good. Look at what is happening with sterling. Sevenyear low in sterling. Euro sterling is a bit of a difference. Termss the consequence in of investment as well. Shortterm or longterm, shortterm volatility, starting press lower, it has lower to go. Under furtherps pressure. How does that play into the mix . Et makes . We are in a situation where europe is trying to manufacture slightly cheaper currency for a sale. Globally. N approach i would say the prospect of europe sets its own Interest Rate policies. The likelihood is the u. K. Is much more ready to raise Interest Rates. I think we are still working through the consequences of the fed in december. The u. K. Is in a stronger position to put Interest Rates up. There is uncertainty around the u. K. Position. It is creating a downdraft on the currency. Longerterm, i think its likely Interest Rates remain an important driver of relative valuation of currency. Sterling has more upside than the euro. Anna you do look to shelter from some of the turmoil and markets. Is there anything you can do, either completely away from the u. K. Or u. K. Assets that might be less affected by what we are seeing here . Eijan we specialize in the that hasinvesting relative value positions, so you are not necessarily having to own assets. You can be shorting. We have managed within our flagship funds to not go down. Positiveelivered returns, which is only possible by having that kind of flexibility. Date, the return fund is positive. Thats because we have these relative value opportunities. I think if you are simply buying assets and holding them, its very important to be able to sift through. There is a temptation at times to jump out of the markets, which is precisely the wrong thing to do. So, if you are committing to the market, i think its very important not to get swept up into these things. We have to barge on. 4 billion according to bank of america left the markets. Fairly hefty downdraft. There are people, retail investors, whatever, withdrawing cash. Stocks offer seven times the value of bonds. Times are valued to seven the value of bonds. Dividends, cash allotments at a high, Global Growth help me jump over those challenges. Eijan i mean, i agree with you. I think stocks and even traded markets offer longerterm value, certainly, compared to cash rates of return. European terms or negative now. I think the question mark is, what is the right valuation. Pe ratio,e right where Interest Rates are available . I think the term i use last time when i joined you was you cant really see Interest Rates going up much more than 2 over the next economic cycle. Whats the right pe ratio . Anna what kind of pe do you look for in that environment . Eijan i think it will gradually go up over time. There are risky assets. After time, things stabilize. They get tired generating zero on their assets and they jumped back in. You are right. With dividend yields up 2. 5 ,ith a multiple of 17. 5 on s p that is not unreasonable when the alternative is generating nothing more worse than nothing. Manus i take it you would possibly go along with it, which is where it has to be low key. The last occasions, trading at 16. 5, it was a buy. Im only going by history. It was a rally. That was the low on the pe, and the month after, a rally of 6 in 2014. A rally of 3. 5 in april of 2011. Eijan its a measure of value. You have to take a value of how solid the e is. Theyre different parts of the world where markets are commodityoriented. We know those are highly cyclical. Historic earnings might be no guide. In of broadly diversified market is, it willthe e not be radically different. Thank you very much, euan. Data out of germany and a reading of the gdp. At 9 a. M. , it is over to the u. K. We get to the ecosurvey. Anna also at 10 00 in the morning, the bank of england governor speaking before lawmakers on his Monetary Policy. Managing policy. That is in switzerland. , a speakerafternoon in houston. Bhp takes a hack into dividends. Profits plunge 92 . We take you through the numbers. What does it all mean . Welcome back. Live from london, 19 minutes past 7 00. Lets get to Bloomberg Business flash. Fourthquarter profits reported. A quiet here for natural disasters. Net income in the quarter rose to 938 million. The Company Announced christine will take over as chief executive officer as of july 1. Intercontinental hotels announced a 1. 5 billion dividend. At the same time, the Company Posted operating profit. , a little ahead of analyst expectations. G ceo will be live right here on bloomberg. Raising midterm revenue forecasters as orders reached a record after the maker of Missile Systems are growth and millet military equipment delivery that led to a 44 surge in profits last year. Theyre becoming more optimistic as military budget for europe and the u. S. Ares debt to recover from cutbacks during the recession. That is your business flash. Bhp billiton cut dividends for the first time in 15 years. They reported a 92 drop. 4. 9 billion a year earlier. Doing int are they this business to try to counter the downturn, because that is it. Key, how you handle the in the will cut spending following year by 2 billion. Its really about the dividend. The cut, i would not say it was a complete surprise to investors. I thinkt further, 74 the larger movies they said the progressive dividend policy we had, that has gone the way of the buffalo. We will pay you at least 50 of underlying profits. They are joining companies saying, with this kind of commodity cycle, we cant guarantee ever and ever greater dividends. Trying to have oil decide what to do. They have a huge exposure to shale. The interesting thing about shale is that while they both aritedown a saying oil they are and show represents an opportunity. Some of the money they are saving they are actually going to put aside to perhaps by oil assets. Unlike the other big commodities producers, they have a lot of oil is part of their operation. That actually might help them in the sense that they say, and the and a lot of people agree, is that prices will not do a whole lot in the short term. The oil price, the oil market recovering next year. So, oil is a good place for them to be. Anna thank you. Euan, take us through your thoughts on the commodity space right now and what investments you have in that area and what you like. Euan i think its time to Start Building back up positions. We knew Commodity Companies are massively cyclical. There will inevitably be dividend cuts in that area. But if you believe, like me, that all is not lost on Economic Growth, even in china, i think china will have to take actions. We started to see that. They are weakening their currency to secure future growth, which they are working through the moment. If you believe this is the beginning of recovery in the u. S. , china is not entirely finished. There is a number of factors least theand not reemergence of the wrong of stage. The oil this leads to commodities being cheap for the moment. Badink it is maybe not a thing to start entering back into those kinds of things. I think from a personal point of view that i should buy some loyal to hedge my heating bills for the next 10 years. [laughter] we have earnings. We touched on it. You must be bullish. Where are most bullish in terms of earnings . What is the driver of the optimism . They are inextricably linked. If you look at the fundamental economic picture, unemployment levels and so on, actually very low. Are in a situation where if you didnt have the market volatility, you would be probably drawing different conclusions. So, because of the slowdown in china, because of the cheap oil funds have been forced to sell a number of equities. That has driven markets. I dont think Central Banks are giving the right level of leadership, so Central Banks are watching the market. About pitchingd rates up. There are worries over whether the fed made the policy in december because it has led to market volatility. I think if the if they showed leadership, raised confidence, talked more confidently about the market, the markets and economies are based on sentiment and confidence. At the minute, what central bankers are doing is marketwatching and its not necessarily helping. In what thelieve fed did rather than the negative rates we are seeing elsewhere. Euan how are banks going to make a reasonable margin if rates are negative . Banks dont encourage them to lend to the economy. Manus has the negative rates story run into they are considering not to. Harge them the impact of negative rates exploded over the past month. Euan yes. Manus do you think theres an opportunity and financials . Is a questionthat of the direction market policy goes in. Note pursue this, its particularly helpful for financials, constantly trying to lower Interest Rates. I think there is a need for innovation and what we need by monica what we mean by Monetary Policy. The wealth funds are selling their equities. Now is a great time to buy lots of energy instead of things we normally do, like sell the gold. Anna alternative stimulus that the central bank would infuse to the government . Euan yes. I think so. There are a lot of unproductive assets on Balance Sheet. 20 seconds give it a go. Euan investing in infrastructure, energy, held wealth funds. Anna thank you very much for joining us. Something innovative for the u. K. , though you heard it here first. Lower opening on the equity markets. Stay tuned. We have the ihg ceo. All ears for that. Move. Ome to on the we are counting you down to the european open. Takes theity crunch hatchet to dividends. Profits plunge 92 . Down after asmack tugofwar between the Prime Minister and the mayor of london. The governor had his chance to speak. Ihg