Transcripts For BLOOMBERG Bloomberg Surveillance 20160111 :

BLOOMBERG Bloomberg Surveillance January 11, 2016

You come to london, what we you talk about. We have so much to talk about. Angela merkel is not going to die both is one of the talking is one demos davos of the talking points. Leader north koreas once a scientist to build a better bomb. He spoke to those responsible for Collingwood North korea called a hydrogen bomb. It is his expectation they will advance their research. David cameron wants to reach a deal on the u. K. s membership in the European Union, paving the way for a National Vote on whether to withdraw from the union. He wants to limit welfare payments to immigrants. Syrias embattled president has launched an incentive, wooing asian powers. Last week he met with chinese leaders who are taking a more active role in brokering with aside. The companys warring faction is not at the table. The taliban was not invited. Their members say they will negotiate only with the United States. Legendary british rock star david billy has died. He was 69 david bowie has died. He was 69. A statement on his Facebook Page said he had been battling cancer for 18 months. He rose to fame with space 1969. In he released his last album on friday. I am vonnie quinn. Tom and francine, i am sure you both have great memories of listening to david bowie. Fan. Francine is a huge it was all about innovation. He was so out front. Billy bragg said david boley was the only major star who embraced. Embraced punk. Francine where are we now . Tom bring it up if you would. Futures doing better and the tape in general doing better. A risk after a tumultuous last week. 32. 67 west texas intermediate is the elephant in the room. You would think the vix with the higher but really 27 is way above that 20 average. Under, like oil, sank, 200. We had an 18 print on mexican peso earlier this morning just for a bit but francine, i know have i know you have been following the South African rand. The emergingmarket currencies are having a tough time. Lets bring it up. Tom she is going to staying saying frampton and a moment. Francine i did want to look at rand because we are seeing a lot more weakness. , sos linked to commodities watch out for the turkish lira, new zealand and australian currency, and the japanese yen. Chinese stocks extended the worst selloff this year following last weeks 10 plunge, but Joseph Stiglitz says does not worry too much about the risk of volatility. Joseph it is not a cataclysmic, it is a slow process of slowing down. There is no real news. What this does remind us as market rules matter. The way you structure those market rules can either diminish the volatility or increase the volatility. What we are seeing here in a sense is a consequence of some market rules that were not as well designed as they could be. Enda curran is in iran. Pboc,e, when we look at if we look at these chinese moves. Haseems that Prime Minister indicated no stimulus. Know, it is like mr. Stieglitz mentioned, there is a debate in china. Perhaps what is happening is not as tightly correlated to the economy as the headlines might suggest. A Credit Demand has been stabilizing. The housing sector has shown some signs of stabilizing. Metal prices are at historic lows. Interest rate cuts, and a lot of targeted lending. The government has pumped in hundreds of billions of dollars trying to get things moving, and they are starting to have some impact. The government is keen not to add to an already large debt in china. They are trying to manage expectations. Data over the coming days will tell us just how the economy has been traveling, and if indeed things are stabilizing. Francine how worried should we be about this capital flight from china . It seems every chinese millionaire and billionaire is taking money out. Enda this has got to be one of the biggest concerns in china right now. As the yuan has weekend, money has left china at an extortion rate. Over 2015. Llars it willt continues, force them to borrow from reserves and try to support the currency. It will weigh on Investor Sentiment and asset prices within china. It is a drain on liquidity and may force the central bank to cut rates further to watch that. Francine enda curran from hong kong, watching what we are seeing in china. Our cohost Stephanie Flanders. Larry summers writing a great piece, but how much should we worry about these market movements . Stephanie we saw it last summer, with a concerns again at that time around the talking time of the stock market spooked global markets. At that time was this concern the chinese authorities were not really on top of the situation. That worried seasoned investors more than the ups and downs of what we know is a volatile domestic stock market. You see the same thing and how they have responded to the changes in currency market policy. It is clearly a work in progress. We know that countries historically have always had trouble, trying to move to more to have a Monetary Policy sovereignty. We know there is a problem. I think this problem that larry it is theghlighted, feeling of lack of insurance policies for the Global Economy. It is not that there is a fundamental downturn or a fundamental risk is posed. It is the fact that we do not have something we can do if something goes wrong. Tom i would this aggregate all of the noise of the weekend and the beginning of the year to the immovable force of copper and oil moving lower. When you talk to john morgan at a. P. Morgan john norman at a. P. Morgan, how do they associate lower Commodity Prices with all the stuff going on . Stephanie they have been so driven by what is going on in china. Francine we had a respite tom we had a respite. Stephanie copper is maybe not as good a signal in this environment as it might have been in the past, but showing serious man side problems with the Global Economy demand side problems with the Global Economy. We know china will not be a big source of growth or momentum as it has been in some past years. The question is whether that slow down in the Core Industrial side is stabilizing and therefore emerging markets in the rest of the world can move forward. That is what i think we are waiting to see, and have not yet seen which is why it has become so easy to feel more downbeat. Francine what have we learned in the last week about the pboc . Policy makers that know exactly how to deal with the economy, the impact on the rest of the world be that much more minimal. Are they trying to figure out what they need to do to stabilize it . Stephanie a managed move and the currency is always a challenge, particularly if you are moving from a semifixed arrangement. I do not think they have shown the same kind of blind panic that you have seen from some of the authorities in china in the past. We sawcourse, the way the Circuit Breakers issues play out also spoke to a lack of understanding and a certain amount of panic. This is something, a b we will get a little more tolerant of their learning curve. It is imposing quite a lot of costs on emerging markets. At 27 shows how ugly week ended on friday, even with a better monday. Francine coming up next on bloomberg surveillance we are joined by hans werner sent. Francine this is bloomberg surveillance with tom keene in london. He brought rain. I was in paris a couple of weeks ago, and it is much more bustling here. Francine Angela Merkels opendoor refugee policy has come under fire after the cologne attacks. Greece has a new Opposition Leader. For more on all of this, lets get to hans nichols in berlin. We started the end of 2015 thinking the eu is better as a whole. What is the mood like now . Hans there a great deal of concern with what is happening with refugees. Complaintsnumber of that have been filed on the cologne attacks and about 40 are sexual of nature. The conversation is dominated by this. Of their today show was dedicated to that issue of sexual violence. Note, one of the leading search terms in germany, where to buy pepper spray. There is a sense of fear. Francine when you look at geopolitics in europe, Angela Merkels popularity waning of it, David Cameron trying to renegotiate the deal with the eu. What is the main risk . Hans i would imagine from the germany perspective it is the threat to shenzhen. What the Free Movement of peoples would mean if we had border checks. You are checking them and slowing them down. And all the, greece time we spent the summer in brussels seen small in comparison to what is happening with migration. Francine hans nichols in berlin. For more on all this, spring and hanswerner sinn. Joining us from use nick. Joining us from munich. The refugee crisis, angela. Erkels opendoor policy how decisive will this issue be for the chancellor and germany . Hanswerner it occupies all the attention. It is very risky for the chancellor because her approach overall find overall support, not even in her own party. There is the bavarian branch of her party, the csu which is in strong opposition to what she is saying. They want upper limits on immigration. Dr. Sinn, i am interested in the german generational divide on these debates, not just in cologne but in general. Your take on the generational divide across all of germany right now, how sharp is it . Hanswerner the generational divide, the older people are very afraid of these happenings which have been reported. Cologne, hamburg, other cities, and it seems that the involvement of recent refugees has been substantial in these cases, so there is a direct link to miss merkels immigration policy. In the moment, people can come to germany and seek asylum and then they are let in without any further control. I have a problem. Francine can you not hear us . We may have to continue this interview later on because hanswerner sinn is having some problems hearing us. He will talk about policy but the refugee crisis. September,nto october saying europe was much better going into the summer. ,e were talking about grexit but we look at 2016, we have a new Opposition Leader in greece. Tom it is about the domestic politics. If we can go back to dr. Sinn, how threatened is the chancellor merkel right now . How threatened is her chancellorship . Hanswerner i do not think it is threatened. The official statement is she did not even plan to go to davos in the first place. That is not any information of importance. Sinn, thank you so much for joining us this morning. Stephanie flanders joining us with jpmorgan. Has there been any change in the scale of a migration debate in europe . Stephanie there is an uneasy parallel with a single currency because the eurozone crisis, people were made to feel worried about their Economic Future because of the inability to maintain a single currency in a stable way. Ace a key part of this. Olds fundamental to the idea of european project to have Freeze Movement of people. Risk is no immediate market moving event ike had with the eurozone crisis. Or threenext two years, this could be threatening to the whole european project. It is difficult for people to gauge because there is pretty positive actions in europe. Tom Stephanie Flanders with us from jpmorgan. We will talk about the future of wall street and the city of london. Coming up, George Magnus will join us. George magnus on the challenges of china and particularly how they relate to the United States and u. K. Bloomberg surveillance. Tom good morning, everyone. Some market stability, that is what new york is enjoying. I cannot get over the Golden Globes. I have no idea what they were talking about. Congratulations to mr. Dicaprio. Summers on volatility, as francine mentioned, markets understood the gravity of the crisis well before the fed. Experience suggests that the best indicator of a countrys future economic prospects is the decisions its citizens make about keeping capital at home or exporting it abroad. He has been on fire recently. Stephanie he has, and it has been one of those moments where it has been a helpful time for him to be on fire. I think he has certainly had a continuing influence on the fed as presenting that alternative case. There are people on the board who i know listen to him very closely. The point he is making in todays article, even he seems a bit torn because most of the time he would say investors do not know what theyre talking about. In this case, he is highlighting the movement and markets as a sign of something to come. What we have seen over the last few weeks is he is right on this point about the lack of insurance for the Global Economy. We have the Global Economy moving along all right, depending on developing World Consumers who have some drivers to keep them going forward. Credit is rising. We have reason to be confident but with the knowledge that there is no safety net. If it turns out that china and the problems with emerging thing emerging market, the deleveraging, if that turns out to be more damaging to the rest of the world, we do not have a lot of places to go. Tom we both picked it out as our morning mustread. Francine he pointed it out in brazil where the markets were right and policymakers were not. We will be joined by roland ride, talking grexit and what David Cameron can do to convince Angela Merkel. 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. Asia from hongin kong, a stable yuan, even if the stock market gave up a little bit. I will call it monday morning stability. And. Lets get to our first word news. Broke up ance antiimmigrant protest in germany over the weekend. Actionrators demanded after hundreds of sexual assaults on women were blamed on immigrants. The biggest economic region in spain is taking another step to forming a government dedicated to seceding from spain. They have elected a new proindependence president. The standoff at a oregon wildlife refuge is under its second week. A group of armed protesters say they will not leave until there was a plan to transfer control of federal land to locals. State police will hand out Water Bottles in Michigan City where people cannot drink from the tap. Let from old pipes contaminated the system months ago. Tests showed elevated lead levels in some of the children. The u. S. Wants to extradite the worlds most wanted drug lord from mexico. El chapo was arrested following a shoot out on friday. Last july, he escaped from prison a second time. Arrest, seanhe payton global news 24 hours a day. As soon as the new tom saidnews broke, when we have that on surveillance . Tom i thought twitter did a great job on this. A of the next comedian lot of the mexican media came out and every single candidate on the sunday show was asked and that of them had an answer, they did not go there they just condemned it without making too much of a deal. Francine he may have been the link that led us to el chapo. Now to discuss the implications of we heard over the weekend that chairman of business in europe is with us and also Stephanie Flanders, jpmorgan asset management. Roland, when you look at the debates and we havent talking t what exactly areuary is the month we being counted, will he have time to negotiate something substantial . Roland i think he will have time to negotiate once he what he wants to get renegotiated. To get the referendum as soon as possible, i make it is a very sensible time to have it done. He will get some major changes, the really key one he is having difficulty with, and a lot of officials will tell you this privately, is benefits. There will be some sort of compromise, but other things he will get in terms of reforming or making it more competitive, which will be good, not just for britain, but for europe, will definitely happen. Francine will he get enough to make sure that the people of his country vote to stay in the eu . And theim confident candidates are not complacent, but they are confident. John redwood made that absolutely clear, so some wont, but the majority of people, they will say that this process of reform is something that is a reversible, unstoppable and there will be another moment which is now, that there will be constant reform. The European Union needs to reform, like any institution. Is thesehe distinction as an movement of bodies across europe and the u. K. , except for that issue, what happens the next day if written exits . Exits . Ritain this question gets the nub of the problem for the outers because they failed to alight on a clear plan for what it looks like outside. Until they can do that, it is no wonder that a majority of people say is it worth the risk . For absolute know sure, but many businesses have made it clear they dont like the idea of that risk, the potential confusion and chaos, and there is a potential. Almost everybody who wants out says we should come back into the Single Market. Eu andwe come out of the back into the market on the same terms or perhaps better . There is no precedent for that happening. Somehow, we have to come back in, but not on the same terms. Wencine one of the things have been looking at is due banks have to do individual contracts again, who would lose the most . Is a currency or the businesses . Stephanie london as a Financial Center would have to work out how its going to respond. The issue for those who are campaigning to

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