Transcripts For BLOOMBERG The Pulse 20150904

Im manus cranny. We have a great lineup for you throughout the next two hours. This hour we will speak to the former italian Prime Minister mary monty. Mario monti. Draghi downgraded the forecast, we speak to the former ecb president jeanclaude trischet. Then we have Russias Deputy Prime Minister who will join us at 10 00 a. M. For todaysharpen because it is jobs report in the United States. It is especially crucial because it is the last one before the feds september meeting where they may hike rates. Lets see how the markets are trading with caroline hyde. Caroline nervousness, riskave will, call it what you we are down when it comes to equities in europe. Three things unnerving investors. The first, it is jobs day. Will it be a bearish sentiment. ,he number is more than 217,000 does that mean a fed rate hike c ome september . But does it mean we will see a hike in september . If the number is below 217,000, does that shine a light on the poor Global Economy once again. Damned if you do, damned if you dont. Nervousness about u. S. Payrolls. And about german factory data. That was poor. Down 1. 4 . And third, chinese worries. We are looking at monday, looking at Government Support of their equities. We are looking at asia. A downward a of the markets. China was close last two days amid the parade. The hang seng up by half a percentage point. This market is having its worst month since Lehman Brothers collapse. Seven weeks we are seeing on the downward trajectory. Lets have a look at the dax. Technical indicators the dax off by 1. 3 . The 50 Day Moving Averages below the 200 Day Moving Average. Dax currently lord. That flight to safety going on the dax currently lower. I want to show what is happening in bond markets. Are. T to where the havens 1 30 p. M. U. K. Time, down and term of basis points. Ecb saying more potentially more bond buying is helping money flood into the bond market in europe. The yen, this is the yen strengthening. The dollar going lower. Yen doing particularly well. Copper and oil, continuing to see their downward spiral. It is a downward day. Manus thank you very much for setting the scene at the start of play on the pulse. Spains economy minister waited on a rate hike today. He spoke to Francine Lacqua in an exclusive interview. Francine are you apprehensive of the fed Interest Rate hike . No. I suppose that for Market Participants, i think the fed hike has been announced, has been discounted. I think that long time ago. But the data, i suppose it will create have confidence. Theres something we have to understand is that we have to normalize the situation. Francine are the markets ready . I know we have difficulties, that liquidity is very relevant. We have ample liquidity in the market. Well, we cannot get used to living with zero Interest Rates. Growth rates have to come from different variables than market Monetary Policy. Markets overreact. But they will accept that, well, we have to normalize the situation. And i think in terms of munication, the in terms of communication, the fed is doing a good job. What volatility means for markets and for the real economy. At the end of the day, there is a reality. Inflation rate is low. Expectations are tempered. You cannot live forever in a world of zero Interest Rates. Manus a bloomberg exclusive with my cohost Francine Lacqua, speaking as closely to the economy minister, luis de g uindos of spain. Which brings us to our twitter question. How strong does the u. S. Job numbers need to be for a september fed hike . Im seeing some responses on twitter. Saying it does not matter. It is down to wages. Some people are calling 250,000. How strong does the number need to be to push the hike over the line . Lets bring in one of her many experts. Globalns us from allianz investors. Lucy, always a big day for jobs day. Its a strong u. S. Economy, they should crack on and show us they are fit to normalize. Is that a fair statement . Lucy in part. Ofhas, um, its got signs strength in some areas and areoyment which we looking in detail today. Over the last few months, we have seen strengthening employment. We have seen some fall in the unappointed rate. They will be looking at longer than one month, august is quite dodgy for revisions. They will look at a longer period and seeing whether that really is an improvement. And it does look as if things have strengthened there. Theres a bit more strength in the housing markets. What has hit the u. S. Economy this year has been what is happened in the oi oil sector. The oil sector has taken up to 1 gdp growth. Capex coming down. Do we think that is going to be continuing . Probably not. We do not like forecasting me price, but will you get an impact next year . Probably not. Manus that is what the fed is going to do. They have to look through those numbers. Lucy yeah. So, will they put everything on whatever the number is see . The number is today . No. It could push some people one way or the other. If its really out of line of expectations, but it should not be. Manus september or december, still 2015 . Lucy 2015. It is 5050 between september and december. Some think they want to go now, earlier. Manus get it done now. Lucy make a start even if it is one and done. Manus get the noise over with so we can enjoy thanksgiving. Tell me this. Chinas slowing down. Weve had a couple of days off from minutia of volatility. Thats what it feels like. Talk to me about americas relationship to china. It is barely 1 of gdp. Expand into emerging markets, it is a more contagious issue. How does it fit into your perspective as a cio . Lucy how much does it affect their decisionmaking about their own economy . Probably more so than it did three month ago, i think. Transmission mechanism is really through the Financial Markets, because it is a small part of the economy. If Financial Markets are seeing outsize volatilities, as we have seen it, on balance, can change the timing of when the decision needs to be made, but it should not really change the u. S. Lying direction of the economy. We are expecting more volatility in these markets. Led by china. Manus lets flick back across. Great manhi, again, for rhetoric. Managed to shift the markets. Ready to do more if it all gets worse. We are going to downgradedhow important is that . What does it take to get them to do more . Lucy more than we have had so far is the answer to that. Gave cleare, he statements that their decisionmaking has been stopped before the latest volatility in markets. And so there is a suggestion that they are looking to the downside still on growth, on inflation and leaving themselves open to be able to do more. That was meant to be calling. Calming. Manus until dow gave up 200 points. Stay with me. Lucy mcdonald joining us from allianz. Here is a look at what else is on our radar. Unicredit is considering cutting another 10,000 jobs, which would affect staff in italy, germany, and austria. Unicredit is currently revising its Business Plan on the expectation that low Interest Rates will continue to hurt profitability in coming years. U. K. Prime minister David Cameron is expected to announce that britain will let thousands more refugees enter the country. This follows pressure from the european allies and domestically where more than 300,000 people have signed a petition pressing the u. K. To take more asylumseekers. Gazpromm have agreed to complete their swap deal. The German Companies will exit the gas trading business. That is in return for states in stakes in siberian gas fields. The transaction which was approved two years ago, will conclude by the end of this year and will be retrospective to april 1, 2013. Now still to come, a tense g20. We will head to ankara next to see what the finance ministers and central bankers are on edge about. On europesng recovery or lack there of. The former italian Prime Minister mario monti joins us. Then, of course, what does the former ecb president think of draghis performance . We will speak to jeanclaude trichet later in the show. Manus welcome back. Ons is the pulse liovve bloomberg tv, streaming on andmberg. Com, your tablet your phone. Politicians are monitoring the situation in china and its knock on effect on their economies, not least in spain. In a bloomberg is closer with Francine Lacqua, she spoke to spains economy minister about how the spanish economy is exposed and here is what he had to say. Luis my perception about china is that china has many sources of growth globally. To now, china is in a transition period. Growth was above 10 for a long time, and now they are converging towards in the area of 5 , 6 . This has to be sustainable over time, and china will make its contribution. But simultaneously we will not see the impact of tha 10 growth rate of the chinese economy. Francine 5 is not bad. We are not talking about 3 growth. Were not talking about things that are dark. Luis you have to bear in mind, also, that this is transition. The covers the action of public powers. Chinese authorities have taken the position to interfere economy,he private something that is evident with respect to stock markets. Something that will have an impact on the evolution of the Exchange Rate. And this is going to have spillover effects on the rest of emerging markets. The world all, in economy, you have to a transformational mode of such an important economy as the chinese economy, it will have an impact. In the short time, markets overreact. But in the mediumterm, that will be positive for the world growth and for world trade. Manus great bloomberg is close of their by Francine Lacqua with spains economy minister p. China is also one of the biggest topics in ankara where the g20 finance chiefs are meeting. Ryan chilcote is there. Good day to you. What is the mood on the ground . Does it appear in the draft communique . What are people talking about china . Ryan there is no mention of china. What it is certain a topic of discussion. We just heard from the Deputy Governor of Chinas Central Bank in an exquisite introducing the fundamentals are fine and that chinas currency is more or less stable. So, hes obviously seeking to on play some of the concerns that many of the g20 20 countries, china aside, share. That is a big issue. I also spoke with a former chairman of sinopec, a gentle man who is the head of two of chinas three biggest oil companies. And he was sort of singing from the same hymn sheet, saying the turbulence we have seen on the Chinese Market and what is going on with the real economy are two different things. Have a listen. Lasttually, especially the two weeks, you see a lot of things happen in china where made lots of people concerning about this. If you look into the details, the fundamentals of the economy have not changed much, but there are only two things either theing or scaring one is stock market performance. The second is the Exchange Rate. But actually see the fundamentals economics, especially the manufacturing, industry seems to not change much. The manus, you talk to finance ministers, central bankers, Business People and they are concerned. I spreak with a turkish billionaire who owns a Shopping Mall in china and he was saying that he is concerned about growth in the country. Have a listen. Im most concerned about creating employment as far as in the global context. Because europe is still not going. China growth is slowing down. What they said on television a couple days ago is that china is growing at 4 or 5 . This is the most important issue right now. Again, you talk to the chinese and they are sticking to their guns. Interview, he stuck to that 7 target for chinese growth for this year. Manus . Manus aside from china, and well done, those are interesting voices. But aside from china, how concerned are these countries about sort of the elephant in the room . The u. S. Starting to raise rates. Ryan i think they are very concerned. We got our hands on the draft communique yesterday. It might change but i bet this reference will stay in. There was a notsosubtle reference to the fed and the prospect of higher rates. That is a big concern for all the countries. The languages that there needs to be Clear Communication when countries tighten and there needs to be calibration. Make you think about the last time the g20 was discussing the prospect of the u. S. Raising rates. It was a big concern. We saw the rand plummet. A lot of emergingmarket currencies plummet on the back of that. So it is a big issue. Dollars strength is a big issue. And you see today again, they are in play. You look at the ruble. One of the emergingmarket currencies. Sure, the big story may be the price of oil. Sanctions. But also dollars strength. The ruble today around 68 to the dollar. Weakening again. I spoke to a russian billionaire close to 14 billion. An 80 stake in the countrys Third Largest steel maker. He was saying from a business perspective, these emerging markets that are commodities exporters, theyre clearly happy with dollars strength in the sense it is weakening their own currencies because that means more money for them. He says that is a good thing. So, watch what happens in that space. A lot of countries in the emergingmarket space, and we heard this from australia which is dependent on china, quietly happy to see their currencies depreciating. Manus . Manus great job in ankara there at the g20. Still with me lucy mcdonnell, chief Investment Officer at allianz. Lucy, i thought it was fascinating to hear the former weopec chairman saying that are getting strung out on stock market volatility. Fundamentals have not changed that much in terms of growth. Yes, lower in china. He has the nail on the head. Lucy fundamentals have not changed, but i think some people have not understood what the fundamentals were previously. That has been the change. That is i think the understanding of how weak the underlying economy has been is now better. Thats good. So, when you look at the real data that we can believe in china and its not much production, retail sales, you can get a better idea of where we are. And those are very weak. Retail sales are strongest. Companies exposed the consumer and china are probably better off than those devlin delving into manufacturing. But those figures have been weak for a while. So that is not news. I think they are still looking at the official numbers, the 7 to 5, and expecting that is when reality. That is reality. Manus part of your notes they our longterm view, that is what you deal in, it is not the daily machinations of markets, our longterm view is that we have debt deleveraging but youre beginning to look selectively into this weakness as opportunities. Where are the most obvious opportunities, because some people say it is like catching falling knives . Lot more trade opportunities. In the long term, we are expecting low growth and markets not to give you 20 returns every year, which we had for the last five years. That time has passed. Shortterm, you have much more interesting valuations than we have seen for over a year. That is a good starting point. Where is the most value and markets . Commodities,n clearly, but you still have downward momentum in the earnings sector. There are bit of falling knives there. Any stabilization in the oil price will be an interesting area to look. Weve seen a little bit more of that recently. I think that is interesting. Financials, i think, still thats a longerterm recovery story. Weve seen it in the u. S. We are seeing it now longerterm going through in europe and asia will probably take longer now. But that you can still see some value there. There is value in big technology. And if you look at apple after their selloff, its 12 times with a 3 . Manus interesting that you bring up apple because thats not hit up on the warning list of exposure to china. 30 . Investors are pulling money out of japan at the fastest rate since 2004. I did a bit of a double take when i read that, because i am assuming that third thereof abenomics and the lower currency would perpetuate that story. Value withine more europe and japan then you have elsewhere. Although you have a lot appearing in emerging and asia now. So, japan is, offers some structural and quite sort of interesting bottomup ideas. I think that is a good Hunting Ground again. There are some really worldclass companies with decent valuations. Manus always great to get your perspective on how the world looks. Chief Investment Officer at allianz. Coming up, first, former italian Prime Minister mario monti will join us. I want to leave you a very invigorating sho as we go to the end of summer in londont. Thes a shot of where takingtti forum is place. We are live next with the former italian Prime Minister. Manus welcome back to the pulse live in london. Im manus cranny. Top headlines. It is job stay in the United States, and we will get the nonfarm payroll data 1 30 p. M. London time the worlds biggest economy is estimated to have added 217,000 jobs. It is the final payroll report before the Federal Reserves hotly anticipated september 16 meeting. Nouriel roubini is weighing in on when the fed will pull the trigger. He says dont hold your breath for a september hike. Nouriel i do believe the fed is not going to hike Interest Rates in september but there will be a rate hike in december. I do not think they will wait until next year. Manus german factory orders fell more than expected in july. Signal of the recovery in germany is a bit bumpy. Over to spain now. One of european economies hardest hit by the International Financial crisis. August data has shown arise in unemployment for the first time in six months. In a bloomberg is was it, Francine Lacqua spoke to the spanish economy minister about the spanish recovery. Luis you have to bear in mind that the crisis in spain was tru ly profound, extremely long, extremely painful, and had an impact on the evolution of the markets in 2009, spains economy lost 1. 5 million jobs. It had to do with the relation of the spanish economy, the developed market relation. And it has to do with the weight of construction in spains economy. Construction, labor in terms of industry. Well, it has an impact on the evolution of labor market timeouts market dynamics. When the situation turns around, then the destruction of jobs is very rapid. This is the impact on spain. Its emotional. All in all, what i have to say is that the peak was reached two years ago, close to 27 . Now are declining in terms of unemployment. And our projection is that it 2014 and 2015 we will be able to create one million jobs. Manus is it middleclass jobs luis it is related to export activities. Well, we have to do more. We cannot be complacent, that is for sure. But i think the direction is totally different than it was only two years ago. You have to take into consideration that in 2012, the spanish economy suffered a recession, a very profound recession. With growth activity of more than 2 . The unemployment destruction was very deep. Layoffs were in the area of 700,000. So, we had a lot of imbalances. And there were a lot of uncertainties in the banking industry, even in the fiscal side. Now the situation is that we have corrected many of these imbalances. And now the spanish economy, despite the problem we have not only an economy problem think nower i spain is a trustworthy economy. Francine that is very high. The imf is asking for more Structural Reforms. How do you reconcile the two . Imf, they have updated the figures for spain. They have said that we are going to grow above 3 . Next year, we will be a faster growing economy. Well, but you know, the role of the imf is to say that there are vulnerabilities in the spanish economy. We weeks of the. We accept that. Manus an exclusive interview with spains economy minister. Lets get more on europes recovery story. Former italian Prime Minister mario monti joins us for the first issue of the day at the ambrosetti conference. Mr. Monti, thank you for joining us this morning. We have just heard from mr. De spanish finance minister, saying there is no room for complacency. My my question to is, european governments, they are very dependent on the ecb and quantitative easing doing the heavy livin lifting. Is there complacency from european politicians . Mario no, dont really think there is one. Certainly there is some relief severees to years of financial crisis in the euro area, but i think the imperative for higher growth is felt around europe as well as in brussels. And european politicians when they meet in brussels as well as the european institutions now feel that one key word to achieve that higher growth is investment, both public and private investment, because certainly be ecb the ecb does all it can in terms of ensuring a facilitating environment. But it cannot create investment itself. Manus it cant, indeed, sir. One of the issues, of course, is china. China is the engine of Global Growth along with the United States of america. From what you have seen so far in terms of policy responses coming from china, sir, how concerned are you about the china growth story . Tell me, how concerned are you about the whole variety of measures they seem to be taking . Must say i just come from one meeting at the abrosetti forum, there was sounding run with the entrepreneurs there and asked to rank the different potential risks for their business ranging of demand,o lack they indicated the crisis for ru ssia. Sorry, for china, is the number one threat. So so there is indeed a lot of concern. Manus and that concern from your perspective, when you see so many policy responses coming from them Interest Rate cuts, interfering with the stock market. In all your political life, what do you make of this whole variety of policy responses . Is this an administration which is losing control . Well, its not easy for any administration, i guess, to have control of the chinas economy. Clearly, they must of been taken also by some anxiety, but im sure that this very wide deployment of measures will have some effect. And certainly, they nevertheless, will have to get to the fact used that china cannot grow at rates of growth that were absolutely unique in economic history. Its certainly reason for concern for all the other economies that the chinese giant is a bit less furious in its growth. On the other hand, this also shows how erroneous some extrapolations into the longterm of Current Trends can be. And all those who were reaching that in a few years china overtakes the rest of the world in terms of economic might will have to reflect. Manus mr. Monti, i want to reflect on issues closer domestically to europe. Weve seen the fed bailout agreed after huge acrimony for greece. How bad were the negotiations handled . How bad has europe come out in negotiating this third bailout with greece . Mario well, europe has come a negative image and reality of very slow negotiations. On the other hand, europe comes veryf it also with a important political and psychological fact, that for all tendency to interact insurrect against the european order, combining discipline and support to growth, in the end, greece, too, has accepted to play by the rules, more or less quickly. So, this was a tortuous process because we saw the Prime Minister of greece, mr. Tsipras, calling for a referendum. An answer toim democracy. Then the following day he contradicted the result of the referendum. But the underlying effect is that the greek people is so deeply attached to the euro and to staying in the euro, that it getbviously trying to better conditions. But is not ready for any government to abandon the along a of greece to the euro. Explainedfore, if well why certain measures are necessary, the greek public is rather resilient to the necessary cures. Now the important thing is that whatever government comes out of the elections of september 20, it really should put top priority on fighting tax evasion and corruption. The two biggest evils of the greek economy. Manus a clear message for whatever kind of coalition comes to power after the greek elections. Former e. U. Commissioner, former italian Prime Minister mario monti, thank you for joining us. Did draghi deliver . We will ask a man who knows a thing or two about running the institution. The former ecb president , jeanclaude trichet. Hes standing by shaking hands with mr. Monit. Mr. Monti. After that we talk u. S. Jobs. That is our 20 question of the day. Our twitter question of the day. How strong do the numbers have to be for a fed hike . Lets take a live shot of new york city. They are waking up and will find out how many jobs they managed to acquire in the u. S. A. A lovely shot. Back in two. Manus welcome back to the pulse live in london. Lets turn our attention to mario draghi. President the ecb revealed some changes to the q. E. Program. The question we are asking is going into the press conference, how dovish will mario draghi be . The governing council decided to keep, to keep ecb Interest Rates unchanged. The governing council decided to increase the issue share limit from the initial limit of 25 to 33 . Casect to a case by verification, the outlook for real gdp growth has been revised down. We may see negative numbers of inflation in the coming months. , the governingon council tends to think these are transitory effects mostly due to oil price effects. The governing council wanted to emphasize in the discussion we had today its willingness to act, its readiness to act and its capacity to act. Manus willingness, readiness, and capacity to act. Those were the words of the current ecb president mario draghi. From one current ecb president to a former ecb president at the ambrosetti forum. He joins me now. It is a jeanclaude trichet. A good day to you, sir. Um, we are just here yesterday from the current ecb minister, head of the ecb. Willing, ready to act. Mario draghi is ready to go again. Now, is this the ecb being progressive or should be we be worried that six months into q. E. , they are getting ready to do more . What i understand is that to the extent there has been a viewing down, both inflation and growth in the years to come, the idea that it is very, very important to continue to counter the risk of materialization of deflation is still there. And what i understand from the position of the governing council, expressed by mario, is clearly that they could, if needed, go over and above the threshold of september next year, which has been the date mentioned when they decided on q. E. So, this is something which was implicit until now. Is now exquisite. Explicit. And is coping with the new situation where the central bank of europe has to pace itself. Explicit definition of being prepared to go beyond if necessary is the exact phrase he used, it comes back to china and the threat to Global Growth. How concerned are you about the threat to Global Growth . And the slowdown in china . I just spoke to mario monti. A said he came from closeddoor session. That is the number one risk the leaders are talking about there on the ground. Jeanclaude well, first of all its absolutely clear that we see someyear, kind of slowing down of growth in the emerging world. The emerging world in the crisis mainbeen t has been the source of growth for the Global Economy. Then we see now some kind of picking up and the u. S. A little bit europe. When, at the same time, the emerging world is slowing down. So we are in a particular episode of Global Growth, which is i would say certainly demanding. On the other hand, i would not dramatize the chinese issue. China was used to grow extremely fast. Run,as not going to be long of course. And the slowing down of growth in china is not necessarily a drama. On that country, if i may, because it will certainly be more sustainable to grow at 7 or 6. 5 for a number of years instead of continuing to grow at 10 . Agai, i w again, i would not but it ismyself, clear that the advanced economies cannot count on the emerging world as we did in the recent past to produce the growth of the global economies. So, we have to concentrate on ourselves, both in europe and in the u. S. And in japan, and concentrate on the kind of Structural Reforms that are badly needed and would elevate the growth potential. And this is, of course, particularly ture in true in europe in my opinion. Manus i appreciate that reform needs to be on the agenda. Some would say the chinese depreciation has launched a new round of currency wars. We saw mario draghi talk about the readiness to do more. Took the Euro Currency lower. That is good news for europe, a lower euro. Where does the currency need to get to to encourage that engine of growth . Are we in a currency war . Lets do a currency first of all. What do you make of the moves . First of all, if we were in a currency war, we would be in a very dramatic situation. Currency war means nobody is gaining. Its a game which is negative sum game. I hope very much we are not in a currency war. That being said, the language of was designed ecb to cope with something which is in the mandate of the ecb, namely to deliver and to produce price stability in line with our definition. The deflationhat forecast has been revised down is we are calling for the language that is appropriate in those circumstances. Interpret myself what has been said by the governing council as to liberally trying to put down the euro. As well as i dont trust the United States of america to take its decisions when the fed takes the decision with a view to manipulate to trigger currency moves. So, it seems to me that we are in a universe where the Central Banks have to do what they do, taking into account their charts, taking into account their mandates which are clear. Growth, we basis of are still living in a world where the Market Participants are drawing themselves their own conclusions. Manus i cnat cant let a the europeanat ran central bank without saying is it time for the fed to move past the markets, normalize, be done with it . One and done, as they say. Jeanclaude well, i would say that the Federal Reserve and the open Market Committee has all the information, and they will have new information until they take the decision. They prepared all Market Participants very well to the necessity of increasing rates when time comes. And it seems to me they put themselves in the best possible solution, because whatever they do, no one would say we are discovering something which is entirely new. We know by the past that decisions that we are that were totally un predicted might create problems. So, everything is quite clear. They might or not take their decision. In my opinion, they will not take their decision as a function of the good advices we see everywhere, in the u. S. And in the world. They will take their decision taking into account their own mandate. I trust that it will be a good decision, whatever it is. I dont want myself to be one of the selfappointed good advisors i was mentioning. Manus a very gracious way. That is one way of avoiding saying whether they will hike in september or december. Lets leave it there. Mr. Jeanclaude trichet. Thank you for your time. For those listening on bloomberg radio, the first word is up next. For our viewers, a very special hour of the pulse. Im going to the airport. Mark where are you off to . Manus im going to italy. Youve got a lot of notes. Mark tahnks thanks for leaving me. You are empowering me. Big interviews. Thanks. The deputy Prime Minister of russia will be joining me at 10 10. Dont miss that. A lot of news out of russia in the last 24 hours. A report from venezuela that the insident said theyve been discussions with russia to do something about oil price stabilitys. I will be asking dvorkovich about that, is the russian economy heavily linked to oil, the ruble heavily linked to oil. Russia is in a recession, the ruble sliding. So much to discuss. And informed. s always aboutwe will talk Financial Market stability, stability, the fed, the ecb. Said jeanclaude trichet he did not want to be one of those selfappointed opinion makers. I think it is fascinating. I am always board talking about the fed. Mark when they collect the data, they collected in the middle of the month and in the middle of the chunk china of people. In the middle of the month, there was china a pedal. Upheaval. The world interestrate probability. What is it, 28 now . Manus 28 for september and 39 for october which takes is to our twitter question of the day which is which is how strong does the u. S. Jobs number need to be to make the fed get on and hike . The pulse. Is going to take you through the next hour of the pulse. That is it from me. Francine will be back. We will be back with you next monday morning. The last reports before the fed september meeting is the jobs report. Anxious markets, european stocks trade lower ahead of the payroll numbers. The central bank is seeing disruptions from the fed left off. It has slowed down in china. On edge in ankara. Good morning to our viewers in europe, good evening to those in asia, welcome to those just waking up in the United States. This is the pulse. We are by from bloomberg headquarters in london. This is all about u. S. Jobs. This release is crucial because it is the last month before the feds september meeting when they may hike Interest Rates for the First Time Since 2006. Lets see how markets are heading ahead of the day. Good morning, caroline hyde. Caroline risk aversion, that is the theme for today ahead of the allimportant payroll at 1 30 p. M. Do we sell of no matter the number . Is better, does that signal a rate rise in september . If it is worse, what does that mean for the Global Economy . Is 1. 8 . There is a slump of 1. 4 area to much worse than the market had expected. When you though china into the next, they are on holiday, but you have concerns about what will happen when they open on monday. With a Government Support china . This is the picture in europe, lets look at the picture in asia. You saw the chinese hang seng. It is the longest slump that we have seen since the lehman collapse, since 2008. Seven straight weeks have seen the hang seng down. Risk aversion is billing into asia as well. The dax, germany, currently up by 1. 3 . Death cross. What does that mean . A 15 Day Moving Average, the moving price of the dax, is below the 200 Day Moving Average, that is a signal to share, down goes the dax. Youre seeing risk aversion playing into the debt market. They seek haven and safety. Youre seeing the cost of the 10youre dead coming down at the moment in terms of yields. Debt come downng at the moment in terms of yield. 600s look at the stoxx across the board. Every Single Energy group is falling off by 1. 8 . Oil and gas are performing the most. Minors are up by 1. 2 . The fxthrow in a bit of mix. This is where we are seeing real risk aversion. This is the yen versus the dollar. The dollar falling and the yen rallying. Considerable a selloff in the aussie dollar. Up half a percentage point. We are at a six year low. Mark oil prices up hold back from a second weekly rise. Crude futures are dipping as much as 1. 5 in new york and made a persistent global what in a response of slides and prices. Russia, the biggest nonopec oil producer has agreed to a plan to address market volatility. We are joined by the russian adorations deputy Prime Minister, arkady dvorkovich. Good morning. Thank you for joining us today. Mr. Dvorkovich thank you, good morning. We have the report yesterday that the venezuelan ,resident has joined with you has joined with russia, and reached an agreement on initiatives to bring stability to the oil market. What can you tell us about these initiatives . We are invich about thensultations oil market station. For russia, it is comfortable to up six fromces those of borrow. We are used to fluctuations in oil prices. More sustainable and predictable russianis suitable for economy, society, and government. We have agreed to have the oiltions on the market and predictability for stakeholders and supply and demand. The new session of opec companies i cannot give details, so far on what they are discussing now, but we are in close contact with our partners. Mark does that mean you are ready to reduce a record High Oil Production along with other major Market Players to achieve a liftoff in prices . Based on theh structure of russian oil production, there is no way that we can artificially have supply oil is being, but fluctuated, leading to lower. Rices and investments this time, the low prices of will go down. Haveovernment cannot authoritative protection on oil reduction. Mark it is heavily tied to the price of oil, the price of the ruble is heavily linked to the price of oil, as well. Are you comfortable with the rubles decline . Against the dollar it has risen from 49 to 70 in a short space of time. Bankvorkovich the central made a strategic decision to move to inflation targeting and russia. It is a greater infiltration in the national currency. Is now at lower rates than before. Demand is aic negative thing, but it also improves prices for producers. In manufacturing you can see the fx in product. Any infiltration and the national currency, that is why we want more Stable Energy market stations. The central bank and the government will not intervene excessively into currency markets. Or establish capital controls on the issue. Mark how much of a bind is the central bank in that would bring down inflation, but the economy needs lower Interest Rates because it is in recession right now. Does that make Monetary Policy difficult for the central bank . Mr. Dvorkovich yes, it is difficult to conduct monetary for inflation goals. When the markets are volatile, especially currency markets are volatile, the central bank it is difficult. The Russian Central Bank is able to balance the goals. Interest rates are going down from 17 , we are down to 11 . The baseline rate is linked to inflation, 11 this year. The oil price and oil markets are also at lower levels. Those can be positive numbers. To finish with china. Russia is a nation that is seeking closer financial ties with china at a time of the chinese economy is wobbling. Are you hurting as a nation from the devaluation in the yuan because of your high reliance on commodity export . Our majorvich trading partner is still europe. The vast majority of our exports are linked to europe. China is our largest country partner. It is important for us to have stable stations in the chinese economy, and we are confident that chinese authorities will find a way to stabilize the stations. There taken greater steps. Strategic for our external relationships, our longterm relationship, so shortterm fluctuations will not affect our longterm friendship and preparations with china. Mark thank you, very much for joining us. Arkady dvorkovich, the deputy Prime Minister of the russian federation. Lets get reaction from neptune investment management. Hello, james. It is a tough time for russia with the economy irrevocably linked to the price of oil. It has stabilized in recent days, but it is such a volatile c commodity. in trying to push up the oil price, venezuela and russia are fighting and norma economic forces. They will find it difficult on the supply side. You have shifting paradoxes in in the fiscalning power of both, but also rising you have china slowing could you cannot fight those things. Mark is oil on a downward trend despite the recent bounce, the threedate increase, which was the biggest threeday rise in 25 years. Are we back below 50 or back below 40 . James i think that extorted very bounce has a lot to do with positioning. We will be probably below 50. Mark it benefits Oil Importing companies, doesnt it . James this is a huge positive, the most positive thing to happen amid all of the negativity and albums, this is the most positive thing to happen in many years. The benefit across the whole world can be seen. To use oil as an input is enormous. These are across billions of consumers across the world. By a veryve is borne concentrated part of the economy. We put more attention on those. This is a huge positive. Mark benefits are bigger than the negatives. Stay here, the chief economist at that do investment management. He will be with us for the whole hour. Heres what else we are watching. Heres what else is on the radar. Another 10,000g jobs which would affect italy, germany, and austria according to 2 sources with knowledge of the plan. Revising its Business Plan on the expectation that lower rates will continue to hurt profitability in coming years. U. K. Prime minister will announce that britain would let in 1000 more refugees according. O a person familiar with it that is from pressure from european allies and domestically. 300,000 people have signed a petition pressuring the u. K. To seekers. Silent promising to complete a multibilliondollar asset swap initially planned for last year. The German Companies were in the returnding business in for stakes in the siberian gas field. Europeanproved by the Commission Two years ago. It will be concluded by the end of this year. It will be retroactive to april 2013. Have investors overreacted to chinese slowdown to the studies to the chinese slowdown . And then in 2020 we will go to anchor to ankara what has financial ministers on edge. A countdown to the u. S. Jobs report. What to expect from the payroll data. That brings us to the twitter question. How does the u. S. Jobs number how strong will it be today for a fed rate hike in september . Tweet me at mark barton tv. How big of a figure do we need the fed to hike Interest Rates in november . 300,000 . 300 50,000 . We will ask james. I will leave you with a live city. F a new york anxiously awaiting todays jobs report. Well be right back. Mark welcome to the pulse. We are live from the bloomberg headquarters in london. Politicians around europe are monitoring the situation in china and the effect on its own economy, not least in spain. In and in an exclusive interview we spoke about how the chinese economy is affecting spain. Francine theyre nervous that china, they think that china will fall off a cliff, or is it just a correction on the markets . How do you perceive the world right now . I suppose the g20 will discuss in depth the situation and the different drivers of growth. That growth iss uneven and fragile. Volatility creates and unease. My perception about china is gone off of the main sources of growth. Has had ashanghai rate above 10 for a long time. Now, they are converging toward a rate that will be in the area of 5 or 6 . This has to be sustainable over time, and china will make its composition. We will see the impact of a 10 growth rate in the chinese economy. Where not talking about 3 growth, or things that are dark. You have to bear in mind that this transition also covers the reaction of the public powers. Chinese authorities have taken the position to interfere less in the private sphere and the private economy. That is something that is in respect that will have an impact on the evolution. Effect on the an rest of the emerging markets. You have transformational sanctions in the chinese economy. In the short term markets will , in the mediumterm, that will be more for growth and the oil trade. For the price of oil, you have benefit. Have benefited. It is very difficult to read. We import the majority of the commodities in the case of energy. Have 2 important savings, savings coming from and derived. Rom the oil price in spain ins is going to be felt. Pain and with inflation and the cost structure. Is a gain again situation, the decline in oil prices. There is an acceleration in spanish growth that we have seen over the last quarters. Other elements of not been so positive. China is not very relevant because our account is less than 20 of the total volume of expenses and exports. The slowdown is going to have a number of affects on emerging markets. For instance, the exposure is. Uite relevant , ih respect to commodities think the impact will be positive in terms of growth right now. An exclusive with spains. Conomy minister we are here with a cio of neptune management. The spanish economy grew 1 in the second quarter. A strong man of europe, have things changed . James they made a lot of progress, social reforms, growth is back. It is a good story. Possibly what we have in the economies where they are struggling today. Mark such as italy or france . France. Taly, possibly mr. Draghi has done it again. It is paved the way for a more dovish ecb going forward. That will be absolutely crucial. Mark data on manufacturing this week showed a contraction, at least italys showed an expansion and spain showed an expansion. Right now it is ugly, but if you get an extension of cutie beyond september 2016, that can push the euro down to parity of qe the on 2016, that can push the euro down to parity. In order to clear the path, we will see that. It will make a big difference to france in particular. Mark thank you. , with us for the entire hour. We will talk to the finance chief. And the secretarygeneral of ecb. We will look at his take on the 2016, right after the break. Mark lets look at what is happening in equity markets today. Its stocks are dropping, it looks like last week or the european stock 600. It was a mirage. One point 6 lower today. The ftse is down by 1. 6 . The dax 1. 7 . Everyone is focused on the big release, 11 30 local time, the u. S. Jobs report. Will it be enough, whatever the figure, to change the feds mind on Interest Rate policy when it announces is decision on september 17. Some say even if we get three hundred thousand it does not matter because the fed will not hike rates. That is the discussion point of the day. China closed for a second consecutive day to commemorate the end of world war ii. I will leave you with pictures of the u. K. Prime minister David Cameron. He is in lisbon addressing the migrant issue. Cameron we have provided 900 Million Pounds in aid to help those affected in syria and the region. This is a great place to work. Not because they have yoga meetings and a juice bar. Because theyre getting comcast business internet. Comcast business offers convenient installation appointments that work around your schedule. And it takes done. About an hour. Get reliable internet thats up to five times faster than dsl from the phone company. Call 8005016000 to switch today. Perks are nice. But the best thing you can give your business is comcast business. Comcast business. Built for business. Mark welcome back to the pulse. Live from Bloomberg European headquarters in london i am mark barton. Here the top headlines. It is jobs day in the United States, we will get payroll data at 1 30 p. M. U. K. Time. They are estimated to have added 150,000 jobs in august. It is the final report before the feds meeting in just under two weeks. Roubini is weighing in on when the feds will pull the trigger, hes a do not hold your breath for a september hike. I do not believe the fed will hike Interest Rate in september, but there will be a rate hike in december. I do not think they will wait until next year. Mark german factory orders falling more than expected in july. Dropping 1. 4 after increasing a revised of one planet percent in june. The recovery in germany may be a bumpy one. Lets check on the market spirit john is here, hello, john. Of it is risk ahead payroll. Every cycle stock on the ftse 100 is lower this morning. Down by 1. 2 5 . The major benchmark in mainland europe, the dax, down by 1. 64 . The death cross him a a 15 Day Moving Average living below the 200 Day Moving Average, that telling more about the journey that we have been on instead of the journey ahead. Down 18 from the year. The drug induced cans, the ecb, a strong signal from them a draghi induced to gains, the ecb, a strong signal from them that theyre ready to do more. The japanese benchmark, the worst week in over a year. It is decidedly risk off. You see that in equity and bond market spirit yield is down two basis points to 0. 7 . In the fx market, the yen and dollar is lower. A stronger yen, dropped below 1. 20. That is not just the driver for the nikkei, that is a risk aversion. A stronger yen, down 8 10 of 1 . Yesterday, it was all about the eurodollar, mario draghi ripping the floor out from this one. A weaker euro at a flat unchanged 1. 11 three hours ahead of a payroll report later. You will struggle to find a single fed official that will base their decisions solely a loan on this jobs market report. They will be looking at the trend over the next year and the outlook for inflation. The market will be investors making a judgment call in three hours time. Mark 25 minutes until surveillance with tom keene. He joins us with a preview. The data wasrt, collected before the real turbulence happened at the end of the month. What do you think . Link them together. It is an important jobs report. We will have that it 8 30 our time. Will be on surveillance. This is a very important report. You are dead on an International International events are intruding from what we saw from mario draghi, and may be what we will see from janet yellen, and i would focus on the shock of the hong kong data overnight. There a number . This is our twitter question, is there a number, lets say it is 300,000 which says the fed will go, or do you not believe we should be thinking like that . Tom this is been a Cottage Industry in new york for the last three days and i was suggested that that number is much, much lower up on when the fed will act. Citigroup has done very good work on this with their team. There but the number, and i will not put it to you exactly, but it is Something Like not 300,000 150,00000, but down would be a cover for janet yellen to act in september. One quick thing, jeff speak before the jobs report, the richmond fed president. Well hear from him him lets get going. Tom keene surveillance. Airlinesto the turkish chief executive. What did he say . , the ceo of Turkish Airlines effectively said that he sees the dow you or the potential of a closer relationship with lenfant airlines. Turkish airlines already has an alliance. Theyre part of the Star Alliance together with luftha nsa. There talking about a deeper partnership. I asked what would happen if they were offered a merger. Some shares were up by as much as 4. 6 . Lufthansa. I the good with the see of Turkish Airlines said. I docannot, right now, but not know about the future, but there is the potential that turkish and left onto and lufthansa could have a partnership. This is something that we discussed a lot in 2012. That was an idea three years ago that left on the that loosed sato that lufthan discarded. Now they really need the Turkish Airlines to make its lowcost offering viable. That is one of the reasons that market watchers say that we saw lufthansa go up when Turkish Airlines shares did not move. A deal muchuld need more than Turkish Airlines. It in a case, this is a theoretical. The conversations we had was an exclusive chat with the chief executive of Turkish Airlines moving the stock today. Mark it is good to see you. Day innext it is jobs the u. S. Everyone is watching with a cane ive. Everything that you need to know about what you may call, should call, and will call the most important jobs report ever. We will he be with a live look of new york city where wall street is anxiously awaiting those numbers. Our twitter question is is there a number for the fed to prop Interest Rates . You can tweet me at markbartontv. Mark well come back to the pulse. We are live in london on bloomberg television. A chinese slowdown, a possible u. S. Rate hike, much more with the g 20 finance chiefs meeting in ankara. We are joined by the secretarygeneral. Five. Live. He is the secretarygeneral of the oec. Very big thanks to you. We know that you are very busy. We want to get it up i talking about china. We heard from the Deputy Governor of the Chinese Central Bank a short while ago saying that the chinese currency is ate or less stable equilibrium. How do you interpret that . I think that you have to see in ahole chinese story broader context. If you look at credit, if you look at the investment side of steel, the currency side, the banking system, then you get bits and pieces. If you look at the overall situation, you have a very important change in speed. That is in what i would call a. Ore sustainable cruising speed at 11 you are at a break next bead. You could break your neck, that is a problem. They are now at a more 7 , or below, whatever it is the question is how to do it in a way that will last and will not create distortions or bubbles. They are looking and trying to tools and fix their strengthen their tools. They do not have all of the answers, but my impression is that they are very aware, not only about their own issues, but also about the fact that everything that happens there is critical for the rest of the world and the expectations about the future. Returning toint, the chinese currency, will those kinds of comments that the currency from the Deputy Governor of the central bank is more or less stable at google librium, will that calm some of the concern and anxiety that we g 20heard from some of the participants that what china is doing is engaging in competitive devaluation . It was the only game in town of five years ago, after that the chinese adjusted the currency. Everyone had peas of mind about the issue, it was not front and center anymore. Had peace of mind about the issue. It was not front and center anymore. Now it is a policy response to a real issue. That happens to every currency in the world when there is a big issue. They adjust the currency and no one writes home about it. Within the have done expected realm of things. I do not think the big issue about china today is whether the rmb is weaker or stronger. I think the question is about the whole economic structure of china, the investment structure, and the change in the productive investment inom exports into domestic consumption. As they move ahead to provide their citizens with better standards of living and more services. As you have this massive, Massive Movement from rural into the cities. In their five year program come million to 20000 million. There is a notsosubtle reference to the need for countries to communicate clearly on their tightening policies and calibrate it with other countries. A notsosubtle reference perhaps to the fed. What are the g20 country saying to the United States . Sec. Gurria we will see, because the meeting starts tomorrow. Calculate the speculation, the cost, to the World Economy about our trying to guess when the fed is going to start or not start etc. My point has always been, for a long time, normalization is good. Normal is good. Normality is good. Moving the rates marginally upwards, which will be a very anyway, is a raise signal of the way to go. Everybody understands it is inevitable. The only question is, one or two months later, that will not change the fate of the world. I would probably say, lets go through it to now so that we eliminate this uncertainty and the speculation. We are moving in the right direction for the right reasons. The decisions are delayed or not. I think that what the fed is doing is rational and consistent with what they have been saying. It is the markets that would like to have greater certainty in order to do the right bet. It is not the policy being affected. It is the speculation that is being promoted by these people who are demanding on the fed what they call more clarity. The fed has been pretty clear so far. They set the stage, and they developed the new language. Now, every central bank has developed this kind of clarity. From my point of view, they are as clear as you can get. Pleaseey are saying, and respect the intelligence of the people, not only the fed people, who are very intelligent they are saying how can i make an absolute statement about what im going to do if i do not know on the going to happen employment and the growth side. There are many uncertainties. There is an element of uncertainty which you cannot get rid of, it is inevitable. We believe that there. We talk all day. The attorney general of the oecd saying if it was up to him the fed should hike rates sooner rather than later. Mark thank you. G20. Kara at the it is jobs day. An Unemployment Rate is near sevenyear at lowes. One thing not reflected his Global Market tour model. Lets bring in market gilbert as we continue with our guest, james dowey. Hello, mark. The fact that the data is collected on the week of the 12th each month, this month it was the 1518. The turbulence really kicked off at the end of that period in the back end of the month. There is that tell us that the shots report is not as important as we have been led to believe, or not . There is a bigger problem. Since 2011, the august number is the most unreliable of all of the months in the year for jobs reports. The average is 100 2000, i think. They add 102 thousand. That is the lowest of any of the months. 175 orer months average 180. The other problem is the revisions. They get revised by twice as much as every other month. Twice as much. The average is they add another 70,000 to 90,000 on when they revise it. Mark the fed says they will hike rates because it will be revised higher. Mark g. you cannot. Theres something about the collection and the time of year that makes august mary unreliable. I would hate to think that the fed next month is going to make a decision on one single data point. Data dependency is well, but single point data dependency mark more on china dependency van dated dependency, arent you james . Get my phone and tweet the word china, because the dead is not dated defended it is china dependent. They want to go before the end of the year, but they cannot do it while there is this level instability in china. Theyre waiting to see the data improve. Mark what is a stable china . James two things. A positive rate on growth, whether that is pm eyes or oruction pmis, production. We do not have that yet. We have policy response in china, we may see that a month or two down the road. The second factor is capital flows. We need to see a cooling down of capital flows in china, and that is a problem for the fed, actually. It is a tugofwar at the center of the Global Economy. The fed wants to tighten, the boc wants to loosen, but the Exchange Rate is locked between them. Loosen, butants to the Exchange Rate is locked between them. Mark are you in the camp of normalization is good . Mark g. there is a worry. Normal is better, but the cost of uncertainty is something that you really have to think about. If normalization is simply the philosophical need to move away from zero as soon as you can, rather than doing it because the inflation outlook tells you you need to tighten Monetary Policy, you have a problem. The bank of england and Federal Reserve are in the same problem. If can tighten in the future you needed to, that seems to be in the background, that is crazy. If you look at how many Central Banks have raised Interest Rates and then have to reverse, it is shocking. I do not think the fed wants to be in the position of raising rates without knowing if inflation is on the horizon and growth is weak. August jobs the rates were weak and china is still a mess, we will have to cut rates. Theres a piece that is published today about the ecb and its 2 inflation target. It follows on, doesnt it, from the jackson hole gathering where they were reflecting on if inflation is relevant, is it not . We looked at a range of thing, core inflations, headline inflation, unemployment. We thank money supplies have gone down. We think the flow of credit is working. When you look at all of those things, your beholding to an inflation target saying you need more qb. Qe. S more it is saying inflation is not a worry. Yesterday, when we asked him about it, at the news conference, to change the inflation target when they are so far away from it it would be tricky, wouldnt it . James it would be tricky. They would have to be very careful to maintain the credibility of your target. If you change it once, youre thinking in expectations that you might change it again when you get there. Mark is right, there are several factors the central bank needs to think about. That can be wrapped up two and inflation view. When inflation is so far away from the target and unemployment is so high, you have to put a lot of weight on the down side. Mark it is down to its lowest level. The german manufacturing levels, in your tees, the current data is showing signs of healthiness. Old bank was very monitor a stake in its view. You would not be loosening policy. Bond iscriticize the bank for many things, but it is mostly responsible for how long it took to get qe in. If we had it 23 years ago we would not be in this place at the moment. I think suspending the inflation target when youre so far below its is ok. When you are above it, it is a different thing. This far below it with no aspects, 1. 3 is their own forecast for 2017, it is a fantasy. Mark thank you for joining us. The twitter question. How strong does the u. S. Jobs number need to be for a september rate hike . Tweet me, you will find me markbartontv. Is there a number that would persuade the fed to definitely hike in september. You tell me. We will leave you with a live shot of new york city where wall street anxiously awaits those jobs numbers. Mark welcome back to the pulse. We are live from bloomberg in london. That is it for us. European equity markets falling on track for their fourth decline. Right across the screen. Of the u. S. Head jobs report, how strong does the u. S. Jobs number need to be for a september rate hike . The consensus is for a 217,000 rise in payroll. What would it have to be for the fed to hike rates in under two weeks. Oull find me at markbartontv have a fantastic weekend, i will see you on monday. Announcer this is bloomberg surveillance. There is a jobs report this morning, 13 days before a critical fed meeting. Willy data dependent janet yellen were markets move off this mornings report. The finance cancels and uncancels his meeting the brazilian finance minister cancels and uncancels his meeting. It is friday, september 4. Im tom keene. With me, vonnie quinn and Brendan Greeley with as many trips to brazil. Brendan it is a political crisis. Foreign investors of always looking at are always looking at the finance minister. His government does not have a government majority. His approach does not have the Political Support to do what he is planning to do. Is i noticed the president polling at 8 in brazil. Ourill touch on this with guest. Here is vonnie quinn with top