Implosion in data in the last 20 minutes. As we open surveillance, what we see is, look at the yields come in. Francine look at the yields, we are in a riskoff mood. Great speech by the anglo gold ceo. Ths saying there is no good out there. Ing tom i would go to the bloomberg terminal and look it up but i have to pay my bill. Francine lets get to the bloomberg news. Heres a funny heres vonnie. The yuan has condemned north koreas launch of a longrange rocket. The Security Council has pledged new sanctions. Taiwan, two survivors from the killer earthquake were pulled out of a toppled highrise building. More than 100 people are still believed to be trapped. Saturdays quake killed at least 37 people. German chancellor Angela Merkel is feeling the heat as she travels to turkey. Merkel plans to urge the turkish government to do more to halt the flow of refugees bound for europe. Theres pressure in germany for merkel to follow other eu countries and turn refugees away. New hampshire votes tomorrow in the first president ial primary. Former president bill clinton cant hold back. Mr. Clinton accused Bernie Sanders of misleading voters. Polls show sanders leading among them aquatic voters in New Hampshire. In super bowl 50, denver shot down carolinas cam newton giving the broncos a 2410 win. It may have been the last quarterback for denver last game for denver quarterback Peyton Manning. Day. Ll the news 24 hours a im vonnie quinn. Tom weve got to do super bowl chit chat, but we cant right now. Markets are on the move. Francine lacqua is looking at this. Twoyear yield in germany moves to new weakness. Know,s were like, i dont negative five, negative six. Forget about that. The 10year yield comes in with a solid move. Eurodollar stable. Oil, oil, oil, im watching. Screen. E next it shows you the yields move that we are seeing right now. To german 10year yield goes 0. 25 . The twoyear yield, check me on this. I believe it is a new low, negative 506. Francine it is a new low. Weve had a reversal. Lowest since, the 2014. Theres a little bit of market angst. They are trying to figure out the next move for Central Banks. We also had the Anglo American ceo, saying we cant rely on a reversal of this price slump anytime soon. 2016predicting a tougher for commodities. Earnings arent great. That is your data check. Tom there it is. Well, thes as peripheral spreads in europe are wider this morning. Will join usroso in the next hour. Lets look at the bank index. Just very quickly, down we go. Heres your 21 bear market. I had a cup of coffee this weekend with two stars from berkeley and jpmorgan. They make like 20,000 a year. These kids are out of smart schools. They bring them in and they are entrylevel. They are not going to lose their jobs because they are lower paid. They were talking about the overall slowdown in banking. Vonnie this includes all the banks from j. P. Morgan chase, a great story on bloomberg about currency traders and how their jobs are gone. Tom theres the bear market to start. Weve got to show this. This is a gorgeous chart. Brings a tear to my eye. Francine . Francine thank you so much. European stocks heading for their longest losing streak since june. You look at those s p 500 futures, feeling the pain from friday. Lets bring in our guest for the hour, kit juckes. You are pretty confident that we are not seeing anything too ugly. You look at the market selloff and theres something ugly. Kit i came in this morning thinking, chinese new year. Francine quiet, go on surveillance, it will be a fun day. We see some people trying to pick up some cheap equities. Here we go again. Francine is it earnings, policymakers, all pointing to nothing optimistic . Kit it is coming from lots of different angles. About europelked for about three weeks, and here we are worried about the equity market, weakness in the banking sector. We are still worried that even if oil is not making new lows every day, we dont think it is going to bounce. We cant get out of this negativity at the moment. On friday, after a perfectly report,. S. Payroll maybe we would get a pause. This is the stuff that makes you nervous, that it is coming from too many different directions. Francine tom kit juckes, theres a correlation in other markets. Anthony, bring it over here to bloomberg again. We are going to show futures down. Heres the flattening of the vanilla yield curve in the United States. Twoyear and 10year flattening out. How correlated are the markets . Kit they continue to be very correlated. The dollar is going up against the other currencies. The first piece of relief i got this morning was, either equities were higher in asia or the yen was weaker. We are driving this through with this flat u. S. Yield curve. Weakness in equity markets, weakness in commodities, and you are choosing between the yen, the dollar, and the euro to be the strongest currency. Were still doing that day today. Do we feel a little bit less frightened of these new headlines coming out . Tom is euro strength a stronger etc. , realr economy, rate differential, etc. , or is it about dollar weakness . Kit almost neither. Euro strength at the moment is risk aversion. Europe is more and more like japan. Accumulates foreign assets at a huge case, so is inclined to strengthen when european investors are putting their money in negative yielding german securities rather than on assets or turkish assets or russian assets or looking for something more exciting. It has become the yen in that sense. Francine what does it mean for the Federal Reserve . Two notes from jpmorgan, bank of america, saying they may go into recession. How is that impacting psychology in the markets . Kit the fed isnt going anywhere right now. It could almost get more complicated. Only last friday, we saw another acceleration in wage growth. This could get quite complicated if you get a Global Environment that is bad enough. Yet someone says, theres the phillips curve, still more or less alive. The fed is going to be walking something of a tight rope. If the economy is not doing terribly well, they will just go negative. Francine coming up next, the conversation with tom albanese. This is bloomberg surveillance on bloomberg tv. We will quiz mr. A lbanese. More on that, coming up. Good morning, everyone. I thought it was a quiet monday. Forget about that. The german twoyear and 10year, a new low. The german 10year grounding down to recent low yields. The yen was a 117 and we are strong. Worthwhile to watch markets suddenly weaker this morning. Francine . Francine we talk about commodities every day. This is mainly on cutting cost. Today, we have the Anglo American ceo giving a brutal assessment of the industry. Who better to talk us through then tom albanese, talking to us from cape town. Great to have you on the program. We heard from Anglo American, giving a very frank and brutal assessment of what will be a very difficult 2016. Do you share that assessment . Mr. Albanese if i look back over the past year, we all thought that 2015 would be the worst of it and we would see a recovery in 2016. The past couple of months has been more of the same. We are all hesitant to say the bottom is here. Weve had a little improvement over the last couple weeks. Zinc and copper, maybe gold, looking a little better than they would have a couple months ago. We all need to be cautious. We need to focus on our cost structure, batten down the hatches, protect our Balance Sheets. We could be in for more of the same. The longer prices stay lower like this, the more difficult it gets for suppliers to stay in business. That means the more improvement we will see when demand again except. Francine what you are saying is the turnaround in Commodity Prices is going to happen slower than you were expecting . Do you push that back to 2016 at the earliest . Mr. Albanese weve seen a nice rally over the past couple weeks. This might be a relief rally. We may beginning to see some supplydemand fundamentals picking up. The surplus in copper production this year is probably more haveive than people would assessed a couple months ago. Im hopeful over the course of 2016 we will see some improvement. Probably, we wont see any big move. Mr. Albanese great is do tom great to speak to you again. You were at rio tinto. What a train wreck that was. You go over to your company now, which is the familyrun indian firm. I want to know the advantage you have, working for a quasi private Company Versus the show, the zoo that you were working with at rio tinto. Going toese im not say anything negative about rio tinto. I had a great time there. We went through an exciting time, when china was growing the on anyones expectations. It has been a really exciting period in my life. Ive been able to live in india. Ive been able to absorb myself in indian business. We have an owner, chairman, founder, who owns 70 of topcoat in the u. K. , who is very bold and assertive about what will be the future for metals in india. That keeps us on a positive face. We are in the Public Markets in india and the u. K. We are cognizant of complying with public requirements. I see ourselves representing a groundfloor opportunity to invest in india with some of the best assets in the sectors we are in. We have 10,000 engineers in the business. The company is hungry. If i want to have something happen, it happens. We dont go through long periods of debate. We make it happen. Tom ill go with that. I read two years ago, a 24page powerpoint from bhp billiton, on their confidence they could clear the Balance Sheet. You had that challenge at rio. You are taking advantage of it with your indian company. How far through the process are we of clearing mining Balance Sheet . Mr. Albanese i think its still going to take quite a bit of time. Recently, all businesses are Generating Positive cash flow after capital. We are putting our efforts into refinancing where necessary and recognizing the Balance Sheets are king. Our other competitors are doing the same thing. It is very difficult when copper would be around two dollars a pound and oil is down less than 35 a barrel, but the businesses are hunkering down and getting it done. Those businesses that are best at it will be best at recovering. This is where we were in the late 1990s. People thought copper was dead. People thought oil was dead. The survivors were the ones that enjoyed the benefit when china kicked in. Im not saying we going to see a china story again, but those that can manage their Balance Sheet the best in this time, stay opportunistic, we can be ok. Francine should minors be more proactive in cutting output instead of focusing on costcutting . Mr. Albanese cutting out what . Francine output. Should we be focusing on getting some of the stuff out . Position,se in our where we are Generating Positive cash flow from the production we make, it makes economic sense to generate more production. We are in an environment where it is in our best sense as an individual company to make the most production that we can. I recognize that does create more supply in the market. We have to recognize and be grownup about that. From a perspective of increasing our volume is king in this market. Tom just because of time, ive got to be quick here. Is the model of a Mining Company with an oil company wrapped into it, is that conglomerate feel over . Are we going to pure mining plays . Mr. Albanese after the past 40 years ive been in the sector, it has been in fashion to be diversified. It has been out of fashion to be diversified. Now, that portfolio gives you more protection through the cycles that are going to still continue in the future. If you have good quality assets, i still believe it is a good model. Tom thank you so much. Im never going to get over that deal out of cape town. It is absolutely gorgeous from our bloomberg facilities. Coming up in our next hour, Anastasia Amoroso will join us. We will look at the other nations. We will look at Eastern Europe and russia as well. Futures deteriorate. Stay with us. Welcome back to bloomberg surveillance. It is the new lunar new year, so asian markets are closed. Germany down 2. 4 . The stoxx 600 is down 2. 4 . The u. S. Looking at a lower open. U. S. Futures for the s p down 1. 24 . The euro is holding below 1. 12. , the metrics are diverging. Nymex crude down 1. 7 . Brent at 33. 43. Tom i cant emphasize how quiet it was two hours ago. It has turned into some challenges here. Francine . Francine the selloff is continuing, especially on the dax. You were looking to the vet into ceo, saying everything seems to correlate to oil. It explained his strategy of having oil and zinc. Are the markets going a bit crazy . Kit yes, but we have been over correlated for a long time. The problem in nonoil commodities is that as costs are held down, currencies are weakening, which helps reduced costs if you are not based in dollar land. We are not cutting supply. It makes you terribly worried about another leg down in Commodity Prices. Not the same in oil, yet the prices move at the same time. I cant avoid being relatively bullish of oilrelated currencies. Reacted, weu also were asking him about china and he said, it brings us back to the 1990s, and china comes back. If it comes back, it is not going to be what we saw 10 years ago. Kit china is rebalancing. It is not the slowdown that is the problem. It is the shift away. Boom, we blewasia up my industry in 2008, and now we are blowing up some of these other industries. That is not coming back anytime soon. Tom you know that when markets move, you never see it coming. What is the thing that is exogenous to the system that you are worried about . In the commodities space, what it is saying to me is, we havent solved the excess , inly, the excess capacity the resources industry, which boom that came in 2003 when the fed was at 1 at the same time as we created all the booms. Tom we have to leave it there. We will come back with kit juckes and take a look at the euro. Coming up in our next hour, we bring you Luigi Zingales us. We will talk about New Hampshire, the primaries, the spirit of our animal spirit. Stay with us. Francine welcome back. This is bloomberg surveillance. Tom keene, this is your data check. The route has deepened over the last hour and a half. We opened flat. Now we are significantly in the red. The stoxx 600 down 3 . I want to show you Deutsche Bank, also commerzbank. We are getting a little bit of concern out there. We are trying to get to the bottom of it. We seem to have a lot of regulators saying Credit Demand doesnt compensate for low interest rates. This is interesting to be put into context. Lets get to the bloomberg first word news. Vonnie the un Security Council is promising to retaliate against north korea for launching a longrange rocket. North korea is celebrating. There was a fireworks celebration in pyongyang today. Says this is a test of Ballistic Missile technology. Meanwhile, the u. S. And south korea will have talks about deploying a Missile Defense system. The president of turkey is signaling the country is prepared to join the war in syria if needed. Turkeynt erdogan said shouldnt repeat the same mistake it made when it turned down a u. S. Request to join the coalition against saddam hussein. Finlandnce minister of is urging the European Union to keep its borders open while it tries to resolve the crisis. Another dispute between industrials between israels Prime Minister and the obama administration. There is no progress on a new military aid practice. The newspaper says netanyahu is willing to wait for the next u. S. President to take office. The u. S. Has warned israel will not get a better deal. In New Hampshire, Chris Christie kept up his defensive against marco rubio. He said the florida senator would crumble in debates if he runs against Hillary Clinton. Rubio is hoping to take second in the primary tomorrow. Get all the news 24 hours a day. Im vonnie quinn. Francine . Francine thank you so much. Chinas Foreign Exchange reserves trying to the smallest since 2012 as beijing continues to sell dollars. For more, lets bring in keyu jin and kit juckes is also with us. Thank you for joining us. When you look at the chinese economy, this is very clear that it takes time for the economy to get rebalanced. The pboc has many challenges. Will they have to devalue the yuan . Keyu i think expectations of a major devaluation is going to be unlikely. They prefer gradual depreciation. They want to give companies with dollar borrowing more room to adjust. I think it is unlikely going to be credible, even if they make a major devaluation. It is a signal that somehow the chinese economy is doing even worse. That would lead to greater capital outflow. I think it is a big risk. I think there is going to be pressure. It is a loss of confidence. Weve seen that in the stock markets. A lot of wealthy people are simply trying to move assets abroad. Companies have acquired foreign assets. Legally or illegally, capital controls are leaky. Tom let me ask you the question we as market types measuring the landing, whatever, what drives you nuts about china coverage . ,ou sit in a vaunted place looking at International Relations in china. What drives you nuts about the recent coverage of china . Keyu this is always driving me nuts there is still a bit of difference in interpretation between what is actually going on and how it is perceived from abroad. In terms of the economic issues, i think the biggest misunderstanding is they are no longer just economic issues. They are also political and social issues. What is stopping econo